O’Reilly Auto Parts sells parts to Rick’s Car Repair with a rebate of 2% on purc
ID: 2518361 • Letter: O
Question
O’Reilly Auto Parts sells parts to Rick’s Car Repair with a rebate of 2% on purchases up to $60,000 and 3% on purchases above $60,000 if Rick’s purchases for the year exceed $200,000. In the past, Rick’s normally purchases $300,000 in parts during a calendar year.
On January 1, 2018, Rick’s purchased $74,000 of parts. The journal entry by O’Reilly to record the sale includes a
a. debit to Accounts Receivable for $74,000.
b. credit to Sales Revenue for $72,380.
c. debit to Accounts Receivable for $72,800.
d. credit to Sales Revenue for $72,800.
Explanation / Answer
Total Value of the Sales = $ 74,000 Less: Discount @ 2% for upto Sales of $ 60,000 = $ 1,200 Net Receivable $ 72,800 For discount 3% is not eligible Journal entry will be passed as below , Journal Entries Date Account Title and explanation Debit Credit Jan, 01 2018 Account Receivable $ 72,800 Discount $ 1,200 To Sales Revenue $ 74,000 So, Answer = Option C = debit to Accounts Receivable for $72,800.
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