(Sales Recorded Both Gross and Net) On June 3, Hunt Company sold to Ann Mlunt me
ID: 2562695 • Letter: #
Question
(Sales Recorded Both Gross and Net) On June 3, Hunt Company sold to Ann Mlunt merchandise having a sales price of $8,000 with terms 2/10, n/60, f.o.b., shipping point. An invoice totalling $120, terms n/30, was reveived by Mount on June 8 from Olympic Transport Service for the freight cost. Upon receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flaws that rendered worthless. The same day, Hunt Company issued a credit memo covering the worthless merchandise and asked that it be returned at company expense. The freight on the returned merchandise was $24, paid by Hunt Company on June 7. On June 12, the company received a check for the balance due from Mount.
Instructions (a) Prepare journal entries for Hunt Company to record all the events noted above under each of the following bases. (10 Sales and receivables at gross profit selling price. (2) Sales and receivables are entered net of cash discount. (b) Prepare journal entry under basis (2), assuming that Ann Mount did not remit payment untill August 5.
Explanation / Answer
SOLUTION
A1. Sales and receivables at gross profit selling price-
A2. Sales and receivables are entered net of cash discount-
2.
Date Accounts title and Explanations Debit ($) Credit ($) June 3 Accounts Receivable -Ann Mlunt 8,000 Sales 8,000 June 5 Sales return and allownaces 600 Accounts Receivable -Ann Mlunt 600 June 7 Transportation 24 Cash 24 June 12 Cash [(8.000-600)* (100%-2%)] 7,252 Sales Discount [(8,000-600)*2%] 148 Accounts Receivable -Ann Mlunt (8,000-600) 7,400Related Questions
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