Exercise 8-1 On January 6, Skysong, Inc. sells merchandise on account to Harley

Question

Exercise 8-1

On January 6, Skysong, Inc. sells merchandise on account to Harley Inc. for $10,300, terms 2/10, n/30. On January 16, Harley pays the amount due.

Prepare the entries on Skysong, Inc.’s books to record the sale and related collection. (Omit cost of goods sold entries.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

Jan. 16

Date

Account Titles and Explanation

Debit

Credit

Jan. 6Jan. 16

Jan. 16

Explanation / Answer

Jan. 6
Debit 'Accounts Receivable - Skysong Inc' $10,300
Credit 'Sales Revenue '- $10,300
Your question cuts off with 'On January 16?' . I am assuming that Skysong Inc. paid on that day, which is within the 10 day discount period, so Skysong can take 2% off the total invoice amount.

( 2% x $ 10,300 ) = $ 206

Amount Skysong Inc. pays = ( $ 10,300 - $ 206 ) = $ 10,094

Jan. 16
Debit 'Cash (or bank account)' $ 10,094
Debit 'Sales Discounts' $ 206 . . . . . . . . . . . . . . . . . . . . .[ a contra-revenue account ]
Credit 'Accounts Receivable - Skysong Inc.' $ 10,300

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