8.Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45

Question

8.Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date? A. Cash 46,000 Accounts Receivable 45,540 Discounts Receivable 460 B. Cash 46,000 Accounts Receivable 45,540 Interest Revenue 460 Accounts Receivable 46,000 Accounts Receivable 46,000 C.)Cash 46,000 did not pay within 10 days so pay in full D. Cash 46,460 Interest Revenue 460

Explanation / Answer

The gross method records an invoice at full price without regard to any cash discounts offered. This method assumes that the customer will not take advantage of the early payment discount. It records the invoice at the gross price and adjusts for discount later if the discount was taken. Oswego will make a flooiwng journal entry on June 10 to record the receipt of payment. Date Account Titles Debit Credit Jun-10 Cash $46,000.00 Accounts Receivable $46,000.00 The answer is Option C.

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