Question

Surplus Galore uses the gross method of accounting for sales discounts. Selected data from its records...

Surplus Galore uses the gross method of accounting for sales discounts. Selected data from its records for the year ended December 31 was as follows:

Debit Credit
Sales $800,000
Accounts Receivable $90,000
Allowance for Sale Discounts $1,200
Estimate sales discounts $1,400

Journalize the adjusting entry for estimated sales discounts.

Business   Accounting   
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Answer #1
General Journal Debit ($) Credit ($)
Sales                1,400
Allowance for Sale Discounts                         1,400
(Allowance for Sale Discounts recorded)
Total allowance for sales discount = (1,400+1,200) = 2,600
And, it will be reported on the balance sheet as follows:-
Accounts receivable              90,000
Less :Allowance for Sale Discounts               (2,600)
Net accounts receivable              87,400
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