Carter Company sells merchandise on account for $4,000 to Hannah Company with credit terms of 2/10, n/30. Hannah Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Carter Company make upon receipt of the check?

Question

Olive Lamb

Business

10 May, 19:55

Carter Company sells merchandise on account for $4,000 to Hannah Company with credit terms of 2/10, n/30. Hannah Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Carter Company make upon receipt of the check?

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Answers (1)

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Giovanni Cortez · Answer 1

Dr. Cash / Bank $3,332

Dr. Sales returns and Allowances $600

Dr. Discount Expense $68

Cr. Account Receivable $4,000

Explanation:

Terms of sale 2/10, n/30 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after sale with net credit period of 30 days.

As per given data

Sale = $4,000

Sales return = $600

Receivable = $4,000 - $600 = $3,400

As the payment is made within discount period, so discount will be availed on the amount due

Discount = $3,400 x 2% = $68

Payment by Customer = $3,400 - $68 = $3,332