A company sold merchandise for $20,000 on account with terms of 3/10,n/30.The company uses a perpetual inventory system.After two days,it received defective merchandise worth $2,000.The journal entry to record the cash receipt for sale if the payment is received within 10 days of the invoice date would include ________.

Question

Quizplus · Accepted Answer

The journal entry to record the cash receipt for sale would include a debit to Cash for the amount received within the discount period ($20,000 x 0.97 = $19,400), a debit to Sales Discount for the amount of the discount ($20,000 x 0.03 = $600), and a credit to Accounts Receivable for the full amount of the sale ($20,000). The defective merchandise would be recorded separately with a debit to Merchandise Inventory for $2,000.

A Company Sold Merchandise for $20,000 on Account with Terms