Question

On June 3, Patel Company sold to Pham Inc. merchandise having a sale price of

$1,500 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $45, terms n/30, was received by Pham on June 8 from the John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Pham.

Instructions

1. Prepare journal entries on the Patel Company books to record all the events noted above under each of the following bases.
   1. Sales and receivables are entered at gross selling price.
   2. Sales and receivables are entered at net of cash discounts.
2. Prepare the journal entry under basis 2, assuming that Pham did not remit payment until July 29.

Answer 1

Answer:

a)

S No	Particulars	Debit ($)	Credit ($)
1	Accounts receivable	1500
	Sales revenue		1500
2	Accounts receivable (1500*(1-0.02))	1470
	Sales discount 1500*2%	30
	Sales revenue		1500

b)

Date	Particulars	Debit ($)	Credit ($)
	Cash	1500
	Accounts receivable		1470
	Sales discount forfeited		30