Joe Company sold merchandise with an invoice price of $1,000 to Gibbs,Inc.,with terms of 2/10,n/30.Which of the following is the correct entry for Joe Company to record the collection from Gibbs within the 10 days if the company uses the periodic inventory system?
A)Choice A
B)Choice B
C)Choice C
D)Choice D

Question

Quizplus · Accepted Answer

Under the periodic inventory system, the cost of goods sold is not recorded at the time of sale. Therefore, at the time of collection, we would only record the cash received and the reduction in the accounts receivable balance. 
The correct entry would be:
Debit: Cash $980 ([$1,000 x 2%] = $20 discount, $1,000 - $20 = $980)
Credit: Accounts Receivable $1,000

Joe Company Sold Merchandise with an Invoice Price of $1,000