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24 December, 13:55

ECG Company recorded two sales on March 1 of $20,000 and $30,000 under credit terms of 3/10, n/30 (3% discount if paid within 10 days, entire balance due in 30 days). Payment for the $20,000 sale was received on March 8. Payment for the $30,000 sale was received on March 25. At what amounts are ECGs gross sales reported for the month of March under the gross method and the net method

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  1. 24 December, 14:21
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    In net method the discount not given is recorded as revenue and in gross method the discount allowed is recorded as expense.

    Explanation:

    ECG Company

    Journal Entries

    Net Method

    Date Particulars Debit Credit

    1 March Accounts Receivable 19400

    Accounts Receivable 29,100

    Sales 48500

    (Calculation of net Sales (20,000 * 3% = 600, 30,000 * 3% = 900) 20,000 - 600 = 19,400 and 30,000 - 900 = 29,100)

    8 Mar Cash 19400

    Accounts Receivable 19400

    Receipt of 20,000 Sales within discount period.

    25 Mar Cash 30,000

    Accounts Receivable 29,100

    Interest Revenue 900

    Receipt of payment after discount time period.

    Gross Method

    1 March Accounts Receivable 20,000 Dr

    Accounts Receivable 30,000 Dr

    Sales 50,000 Cr

    Transactions of Sales on gross method. Here discount is not calculated unless given.

    8 Mar Cash 19400 Dr

    Discount Allowed 600 Dr

    Accounts Receivable 20,000 Cr

    Receipt of 20,000 Sales within discount period.

    25 Mar Cash 30,000 Cr

    Accounts Receivable 30,000 Cr

    Receipt of Sales of 30,000 after the discount period.
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