Assume you are the owner of Victory Cycle Shop and just received an order of bik

Question

Assume you are the owner of Victory Cycle Shop and just received an order of bikes from Roseville. You notice that the invoice dated September 22 has terms of 2/10, n/30. The amount of the invoice was originally $1,000. The payment was made on September 29; however, the clerk failed to book the transaction on September 22. Identify the adjustments that need to be made in that period in terms of the accrual principle. Explain how to journalize and how to make the adjustments for the proper accounting period. Address the following items in your response: What is your motivation for offering the sales discount? Identify three incentives customers would face to not pay the invoice within the discount period.

Explanation / Answer

september 22 the entrie is

accounts receible a/c dr $ 1,000

to sales a/c $ 1,000

on payment is made with in 10 days so adjustment entry is

cash a/c dr $ 980.00

sales discount dr $ 20.00

to accounts receivable a/c $ 1,000.00

if the payment is not made within 10 days the discount is not valid and total payment is payable

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