A firm sells inventory for $1 000, including GST, on credit with terms of 2/10, n/30. Defective inventory of $200, including GST, is returned 2 days later. Which of the following entries would be made to record the cash receipt for the sale if the payment is received 20 days later?
A)The accounting entry would be an $800 debit to Cash, a $14.55 credit to Sales discounts, a $1.45 credit to GST Clearing and a $784 credit to Accounts receivable.
B)The accounting entry would be a $784 debit to Cash, a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing and an $800 credit to Accounts receivable.
C)The accounting entry would be an $800 debit to Cash and an $800 credit to Accounts receivable.
D)The accounting entry would be a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing, an $800 debit to Cash and an $816 credit to Accounts receivable.

Question

Quizplus · Accepted Answer

The payment is received after the discount period, so no discount is applied. The cash receipt is for the net amount after the return, which is $800.

A Firm Sells Inventory for $1 000, Including GST, on Credit