A company sells merchandise for $2,000 on account FOB shipping point with terms of 2/10 net/30 and prepays $100 of transportation costs for the buyer. Which of the following entries would be made to record receipt of full payment from the buyer if the payment is received 20 days later?
A) The accounting entry would be a $2,100 debit to Cash and a $2,100 credit to Accounts receivable.
B) The accounting entry would be a $2,100 debit to Cash, a $42 credit to Sales discounts and a $2,058 credit to Accounts receivable.
C) The accounting entry would be a $2,100 debit to Cash, a $40 credit to Sales discounts and a $2,060 credit to Accounts receivable.
D) The accounting entry would be a $2,060 debit to Cash, a $40 debit to Sales discounts and a $2,100 credit to Accounts receivable.

Question

Quizplus · Accepted Answer

The correct entry reflects the full payment of the invoice amount plus the prepaid transportation costs, without any sales discount since the payment was made after the discount period (2/10 net/30).

A Company Sells Merchandise for $2,000 on Account FOB Shipping