Question

For each of the following transactions, record the appropriate journal entries using the gross method and the net method. Wildcat Wins sold 400 basketballs to a basketball training camp. The basketballs are sold on credit for $15 each. The payment terms for this transaction are 2/10, n/30. The basketball training camp makes full payment within the transaction period.The basketball training camp makes payment after the discount period but within the thirty days.

Answer 1

Gross method
Payment within discount period
Account	Debit	Credit
Accounts receviable	$      6,000
Sales revenue		$    6,000
(Entry to record sale)
Cash	$      5,880
Sales discounts	$          120
Accounts receivable		$    6,000
(Entry to record collection)
Discount = $6,000 X 2% = $120
Payment after discount period
Accounts receviable	$      6,000
Sales revenue		$    6,000
(Entry to record sale)
Cash	$      6,000
Accounts receivable		$    6,000
(Entry to record collection)
Net method
Payment within discount period
Account	Debit	Credit
Accounts receviable	$      5,880
Sales revenue		$    5,880
(Entry to record sale) Sale = $15 X 400 X (1-2%)
Cash	$      5,880
Accounts receivable		$    5,880
(Entry to record collection)
Payment after discount period
Accounts receviable	$      5,880
Sales revenue		$    5,880
(Entry to record sale)
Cash	$      6,000
Sales discount forfeited		$       120
Accounts receivable		$    5,880
(Entry to record collection)

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