3 of 3 Required: In an effort to increase sales during the upcoming year, Lynbro
ID: 2343143 • Letter: 3
Question
3 of 3
Required:
In an effort to increase sales during the upcoming year, Lynbrook implemented a new credit policy of offering terms of 3/15, n/30. Your CFO is trying to decide between the NET method of recording receivables and the GROSS method, so she asked you to prepare entries using both methods.
Information:
On January 15, 2019, Lynbrook billed Scan House, Inc. $25,000 for consulting services provided during the first week of January.
Required:
Net Method entries
1. Prepare the journal entry to record the sale using the net method.
2. Prepare the journal entry assuming the payment is received on January 25, 2019.
3. Prepare the journal entry assuming the payment is not received until February 14, 2019.
Gross Method entries
4. Prepare the journal entry to record the sale using the gross method.
5. Prepare the journal entry assuming the payment is received on January 25, 2019.
6. Prepare the journal entry assuming the payment is not received until February 14, 2019.
Explanation / Answer
Answer
WHEN NET METHOD IS USED
WHEN GROSS METHOD IS USED
Date
Accounts title
Debit
Credit
Accounts title
Debit
Credit
15-Jan-19
Accounts receivables
$ 24,250.00
Accounts receivables
$ 25,000.00
Service Revenue
$ 24,250.00
Service Revenue
$ 25,000.00
(Services provided at 3% discount)
(Services provided on account)
25-Jan-19
Cash
$ 24,250.00
Cash
$ 24,250.00
Accounts receivables
$ 24,250.00
Service Discount & Allowances
$ 750.00
(Cash received within discount period)
Accounts receivables
$ 25,000.00
(Cash received within discount period)
14-Feb-19
Cash
$ 25,000.00
Cash
$ 25,000.00
Sales revenue
$ 750.00
Accounts receivables
$ 25,000.00
Accounts receivables
$ 24,250.00
(Cash received after discount period)
(Cash received after discount period)
WHEN NET METHOD IS USED
WHEN GROSS METHOD IS USED
Date
Accounts title
Debit
Credit
Accounts title
Debit
Credit
15-Jan-19
Accounts receivables
$ 24,250.00
Accounts receivables
$ 25,000.00
Service Revenue
$ 24,250.00
Service Revenue
$ 25,000.00
(Services provided at 3% discount)
(Services provided on account)
25-Jan-19
Cash
$ 24,250.00
Cash
$ 24,250.00
Accounts receivables
$ 24,250.00
Service Discount & Allowances
$ 750.00
(Cash received within discount period)
Accounts receivables
$ 25,000.00
(Cash received within discount period)
14-Feb-19
Cash
$ 25,000.00
Cash
$ 25,000.00
Sales revenue
$ 750.00
Accounts receivables
$ 25,000.00
Accounts receivables
$ 24,250.00
(Cash received after discount period)
(Cash received after discount period)
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