On June 3, Arnold Company sold to Chester Company merchandise having a sale pric
ID: 2427192 • Letter: O
Question
On June 3, Arnold Company sold to Chester Company merchandise having a sale price of $4,500 with terms of 4/10, n/60, f.o.b. shipping point. An invoice totaling $93, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company.
Prepare journal entries on the Arnold Company books to record all the events noted above under each of the following bases.
(2)
(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
(2)
Sales and receivables are entered at net of cash discounts.Explanation / Answer
Journal entries on the Arnold Company books
Case -1: Sales and receivables are entered at gross selling price
Journal Entries:
Date
Accounts Titles and Explanations
Debit
Credit
June. 3
Accounts receivable -Chester Company
$ 4,500.00
Sales Revenue
$ 4,500.00
(Being Merchandise sold on account)
June. 8
Freight out
$ 93.00
Accounts receivable -Chester Company
$ 93.00
(Being freight expense recorded)
June. 12
Cash (4407-180)
$ 4,227.00
Sales Discount (4500*4%)
$ 180.00
Accounts receivable -Chester Company (4500-93)
$ 4,407.00
(Being balance due received)
Case-2: Sales and receivables are entered at net of cash discounts.
Journal Entries:
Date
Accounts Titles and Explanations
Debit
Credit
June. 3
Accounts receivable -Chester Company (4500-180)
$ 4,320.00
Sales Revenue
$ 4,320.00
(Being Merchandise sold on account)
June. 8
Freight out
$ 93.00
Accounts receivable -Chester Company
$ 93.00
(Being freight expense recorded)
June. 12
Cash (4320-93)
$ 4,227.00
Accounts receivable -Chester Company (4320-93)
$ 4,227.00
(Being balance due received)
Journal entries on the Arnold Company books
Case -1: Sales and receivables are entered at gross selling price
Journal Entries:
Date
Accounts Titles and Explanations
Debit
Credit
June. 3
Accounts receivable -Chester Company
$ 4,500.00
Sales Revenue
$ 4,500.00
(Being Merchandise sold on account)
June. 8
Freight out
$ 93.00
Accounts receivable -Chester Company
$ 93.00
(Being freight expense recorded)
June. 12
Cash (4407-180)
$ 4,227.00
Sales Discount (4500*4%)
$ 180.00
Accounts receivable -Chester Company (4500-93)
$ 4,407.00
(Being balance due received)
Case-2: Sales and receivables are entered at net of cash discounts.
Journal Entries:
Date
Accounts Titles and Explanations
Debit
Credit
June. 3
Accounts receivable -Chester Company (4500-180)
$ 4,320.00
Sales Revenue
$ 4,320.00
(Being Merchandise sold on account)
June. 8
Freight out
$ 93.00
Accounts receivable -Chester Company
$ 93.00
(Being freight expense recorded)
June. 12
Cash (4320-93)
$ 4,227.00
Accounts receivable -Chester Company (4320-93)
$ 4,227.00
(Being balance due received)
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