On November 10 of the current year, Flores Mills sold carpet to a customer for $7,600 with credit terms 4/10, n/30. Flores uses the gross method of accounting for sales discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date

Question

Jon Frazier

Business

14 January, 18:59

On November 10 of the current year, Flores Mills sold carpet to a customer for $7,600 with credit terms 4/10, n/30. Flores uses the gross method of accounting for sales discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date

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Answers (1)

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Lilah Dean · Answer 1

The correct entries are:

Dr Cash $7,296

Dr Sales discount $304

Cr Accounts receivable $7,600

Explanation:

First and foremost, the terms of sales transaction states that 4% cash discount is given if payment is made within the next ten days.

Payment made on 17th of November is within the stipulated ten days and as a result the cash discount is allowed.

The amount to be recorded as cash as (100%-4%) * $7600 = $7296

The balance of $304 is the sales discount allowed

The double entries would be as below:

Dr Cash $7,296

Dr Sales discount $304

Cr Accounts receivable $7,600