Question

Citron Mechanical Systems makes all sales on credit, with terms 1/15, n/30. During 2019, the list price (prediscount) of services provided was $687,500. Customers paid $482,000 (list price) of these sales within the discount period and the remaining $205,500 (list price) after the discount period. Citron uses the gross method of recording sales.

Required:

1.	Compute the amount of sales that Citron recorded for 2019.
2.	Compute the amount of cash that Citron collected from these sales.
3.	Assuming the net method was used for all sales, prepare a summary journal entry to record these sales and a second summary entry to record the cash collected.

Answer 1

1) Journal entry

Date	account and explanation	Debit	Credit
2019	Account receivable	687500
	Service revenue		687500
	(To record sales)

2) Journal entry

Date	account and explanation	Debit	Credit
2019	Cash	682680
	Sales discount (482000*1%)	4820
	Account receivable		687500
	(To record collection)

3) Journal entry

Date	account and explanation	Debit	Credit
2019	Account receivable (687500*99%)	680625
	Service revenue		680625
	(To record sales)

Date	account and explanation	Debit	Credit
2019	Cash	682680
	Sales discount Forfeited		2055
	Account receivable		680625
	(To record collection)