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28 July, 17:01

On October 1, Courtland Company sold merchandise in the amount of $5,800 to Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Courtland uses the periodic inventory system. Carter pays the invoice on October 8, and takes the appropriate discount. The journal entry that Courtland makes on October 8 is:

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  1. 28 July, 17:25
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    The journal entry that Courtland makes on October 8 is:

    Debit Cash $5,684

    Debit Sales Discount $116

    Credit Receivable Accounts $5,800

    Explanation:

    On October 1, when Courtland Company sold merchandise, the following entries were made:

    1. Debit Cost of goods sold $4,000

    Credit Merchandise $4,000

    2. Debit Receivable Accounts $5,800

    Credit Sales $5,800

    Credit terms of 2/10, n/30 means that 2% discount for the payment within 10 days and the full amount to be paid within 30 days.

    Carter pays and takes the appropriate discount:

    2% x $5,800 = $116

    Cash Courtland Company receives: $5,800-$116 = $5,684

    The journal entry that Courtland makes on October 8 is:

    Debit Cash $5,684

    Debit Sales Discount $116

    Credit Receivable Accounts $5,800
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