Maxie's Game World sold games to a customer on credit for $2,600, terms 1/10, n/30 and the cost of the games was $1,700. When recording the collection from the customer made within the discount period, in its cash receipts journal, Maxie's would enter:
A) $2,600 in the Cash Dr. column. $2,600 in the Sales Cr. column, and $1,700 in the Cost of Goods Sold Dr./Inventory Cr. column.
B) $2,574 in the Cash Dr. column, $26 in the Sales Discount Dr. column and $2,600 in the Accounts Receivable Cr. column.
C) $2,574 in the Cash Dr. column and $2,574 in the Accounts Receivable Cr. column.
D) $2,600 in the Cash Dr. column and $2,600 in the Accounts Receivable Cr. column.
E) $2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr. column.

Question

Quizplus · Accepted Answer

When the customer paid within the discount period, Maxie's would record the cash receipt as follows:
- $2,574 in the Cash Dr. column (the amount received after the 1% discount, calculated as $2,600 x 0.99)
- $26 in the Sales Discount Dr. column (the amount of the discount, calculated as $2,600 x 0.01)
- $2,600 in the Accounts Receivable Cr. column (to reduce the balance owed by the customer)
Note that the cost of the goods sold is already recorded when the sale was made, so there is no need to record it again in the cash receipts journal.

Maxie's Game World Sold Games to a Customer on Credit