Question 1 of 18 Consider the following facts: - Company A sells merchandise on

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Question 1 of 18 Consider the following facts: - Company A sells merchandise on account for $3,000 to Company C - The credit terms of the sale are 2/10, n/30 - Company C returns $450 of the merchandise - Company C pays the outstanding balance within the discount period Which of the following is true about the journal entry, Company A will make when Company C pays? Sales Discounts will debited for $51 Cash will be debited for $2,550 Sales Returns and Allowances will be debited for $501 Accounts Receivable will be credited for $2,550 None of these answers are correct

Explanation / Answer

Assuming Gross method of accounting

Sales =$3000

So Accounts Receivable Balance =$3000

Sales return $ 450.

So Accounts Receivable Balance after sales return = $3000-$450= $2550

At the time of payment within discount period,

Sales discount =2% of $2550 =$51

Therefore entry will be  :               Accounts Receivable        Cr 2550

                                                      Sales discounts Dr 51

                                                                       Cash Dr 2499

So statemet 1 & 3 are correct            

                                  

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