Question

O’Reilly Auto Parts sells parts to Rick’s Car Repair with a rebate of 2% on purchases up to $60,000 and 3% on purchases above $60,000 if Rick’s purchases for the year exceed $200,000. In the past, Rick’s normally purchases $300,000 in parts during a calendar year.

On January 1, 2018, Rick’s purchased $74,000 of parts. The journal entry by O’Reilly to record the sale includes a

a. debit to Accounts Receivable for $74,000.

b. credit to Sales Revenue for $72,380.

c. debit to Accounts Receivable for $72,800.

d. credit to Sales Revenue for $72,800.

Answer 1

	Total Value of the Sales =	$                74,000
	Less: Discount @ 2% for upto Sales of $ 60,000 =	$                   1,200
	Net Receivable	$                72,800
	For discount 3% is not eligible
	Journal entry will be passed as below ,
Journal Entries
Date	Account Title and explanation	Debit	Credit
Jan, 01 2018	Account Receivable	$                72,800
	Discount	$                   1,200
	To Sales Revenue		$                 74,000
	So, Answer = Option C = debit to Accounts Receivable for $72,800.