Question

Harwell Company manufactures automobile tires. On July 15, 2018, the company sold 2,700 tires to the Nixon Car Company for $80 each. The terms of the sale were 3/10, n/30. Harwell uses the net method of accounting for cash discounts.

Required:
1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on July 23, 2018.
2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on August 15, 2018

Answer 1

• All working forms part of the answer
• Requirement 1

Date	Accounts title	Debit	Credit
15-Jul-18	Accounts receivables [2700 x 80 x 97%]	$                      209,520
	Sales revenue		$                     209,520
	(Sales recorded)
23-Jul-18	Cash	$                      209,520
	Accounts receivables		$                     209,520
	(Cash received within discount term of 10 days)

• Requirement 2

Date	Accounts title	Debit	Credit
15-Jul-18	Accounts receivables [2700 x 80 x 97%]	$                      209,520
	Sales revenue		$                     209,520
	(Sales recorded)
15-Aug-18	Cash	$                      216,000
	Sales Discount forfeited		$                          6,480
	Accounts receivables		$                     209,520
	(Cash received after discount term of 10 days)