Hole Sailors, Inc. sold merchandise on credit with a list price of $12,000. Term

Question

Hole Sailors, Inc. sold merchandise on credit with a list price of $12,000. Terms were 1/20, n/45. Which of the following entries correctly applies the indicated method to record the sale?

Gross Price Method

Accounts Receivable     12,000

   Sales 12,000

Net Price Method

Accounts Receivable     10,800

   Sales 10,800

Net Price Method

Accounts Receivable     12,000

   Sales 12,000

Net Price Method

Accounts Receivable     11,400

   Sales 11,400

a.

Gross Price Method

Accounts Receivable     12,000

   Sales 12,000

b.

Net Price Method

Accounts Receivable     10,800

   Sales 10,800

c.

Net Price Method

Accounts Receivable     12,000

   Sales 12,000

d.

Net Price Method

Accounts Receivable     11,400

   Sales 11,400

Explanation / Answer

Journal entry of above situation :

so answer is a) Gross price method : Debit account receivable 12000; credit sales 12000

Date accounts & explanation debit credit Gross method Account receivable a/c 12000 Sales a/c 12000 Net method Account receivable a/c (12000*99%) 11880 Sales a/c 11880

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