Recording Sales Gross and Net: On June 3, Stanly Company Sold to Paul Company me

Question

Recording Sales Gross and Net: On June 3, Stanly Company Sold to Paul Company merchandise hacing a sale price of $3,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $90, terms n/30, was recieved by Paul Company on June 8 from John Booth Transport Service for the freight cost. On June 12, the compant recieved a chck for the balance due from Paul Company.

(a) Prepare journal entries on the Stanly Company books to record all the events noted above under each of the following bases.

(1) Sales and receivable 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 Paul Company did not remit payment until July 29.

Explanation / Answer

(1) Sales and receivables are entered at gross selling price. Jun 3 Debit Credit Account Receivables - Paul Company $3,000.00                                  Sales Revenue $3,000.00 Jun 12 Cash $2,940.00 Sales Discount ($3000 x 2%) $60.00                       Account Receivables - Paul Company $3,000.00 (2) Sales and receivables are entered at net cash discounts. Jun 3 Account Receivables - Paul Company ($3000 -$60) $2,940.00                                  Sales Revenue $2,940.00 Jun 12 Cash $2,940.00                       Account Receivables - Paul Company $2,940.00 (b) Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment until July 29. Jul 29 Cash $3,000.00                       Account Receivables - Paul Company $2,940.00                       Sales Discounts Forfeited $60.00

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