A company sold inventory for $24,000 on credit with terms of 3/15,n/30.The company uses a perpetual inventory system.After two days,it received defective inventory worth $2000.The journal entry to record the cash receipt for sale if the payment is received within 10 days of the invoice date would include:
A)a debit to Cash for $21,340,a debit to Sales discount for $660 and a credit to Accounts receivable for $22,000.
B)A debit to Sales for $24,000,a credit to Accounts receivable for $24,000 and a credit to Sales discount for $2000
C)a debit to Cash for $22,000,a debit to Inventory for $2000 and a credit to Accounts receivable.
D)a debit to Cash for $21,340,a credit to Inventory for $660 and a credit to Sales revenue for $22,000.

Question

Quizplus · Accepted Answer

Since the company uses a perpetual inventory system, the debit to Inventory account would have been made at the time of the sale. 
The sale was made on credit for $24,000, but since the customer takes a discount of 3% for paying within 10 days, the amount of cash received would be $24,000 - ($24,000*0.03) = $23,280. 
The defective inventory would not affect the cash received for the original sale, so it would not be included in the journal entry for the cash receipt.
Therefore, the journal entry to record the cash receipt for the original sale would be:
Debit Cash for $23,280
Debit Sales discount for $720 ($24,000 x 0.03)
Credit Accounts receivable for $24,000.

A Company Sold Inventory for $24,000 on Credit with Terms