On June 3, Bolton Company sold to Arquette Company merchandise having a sale pri

Question

On June 3, Bolton Company sold to Arquette Company merchandise having a sale price of $2,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $90, terms n/30, was received by Arquette 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 Arquette Company.

(a) Prepare journal entries on the Bolton Company books to record all the events noted above under each of the following bases. (1) Sales and receivables are entered at gross selling price. (2) Sales and receivables are entered at net of cash discounts.



(b) Prepare the journal entry under basis 2, assuming that Arquette Company did not remit payment until July 29.

Explanation / Answer

Hi,

Please find the answer as follows:

Part A (1):

June 3:

Accounts Receivable - Arquette Dr. 2000

Sales Cr. 2000

June 12:

Cash Dr. 1960

Sales Discounts (2000*2%) Dr. 40

Accounts Receivable - Arquette Cr. 2000

Part A (2):

June 3:

Accounts Receivable - Arquette Dr. 1960

Sales (2000*98%) Cr. 1960

June 12:

Cash Dr. 1960

Accounts Receivable - Arquette Cr. 1960

Part B:

July 29:

Cash Dr. 2000

Accounts Receivable - Arquette Cr. 1960

Sales Discounts Forfieted Cr. 40

Thanks.

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