On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts what are the journal entries to recorded the trnascations.

Question

Nickolas

Business

9 October, 18:39

On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts what are the journal entries to recorded the trnascations.

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Allyson Thompson · Answer 1

The journal entry is shown below:

1. Accounts receivable A/c Dr $160

To Sales discounts forfeited $160

(Being sales discount is recorded)

The computation of the sales discount is shown below:

= (Sales value - payment made) * discount rate

= ($40,000 - $24,000) * 1%

= $160

2. Cash A/c Dr $16,000

To Accounts receivable A/c $16,000

(Being cash is received)