contestada

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,500 with credit terms 2/10, n/30. Flores uses the gross method of accounting for sales discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date?

Respuesta :

Answer:

Description                             Amount (Dr)                   Amount (Cr)

Cash                                           8,330

Sales Discount (0.02x8500)       170

Accounts receivable                                                     8,500

Explanation:

The question is to determine the correct accounting entry for Flores on November 17th based on the assumption that the correct payment was received on that same 17th November

First, it should be noted that since the payment as made within the 10 days of purchase, the discount based on the credit terms will apply.

Therefore, the discount of 2% on the Gross Recievable amount will be treated as sales discount

As such therefore, the recognition is as follows

Description                             Amount (Dr)                   Amount (Cr)

Cash                                           8,330

Sales Discount (0.02x8500)       170

Accounts receivable                                                     8,500