Question

1. On June 3, a company sells merchandise with price of $2,000 (Terms: 2/10, net 60. Instructions: Prepare all the seller’s journal entries related to this sale and customer payments for both the Gross and Net methods under the following three mutually exclusive cases.

Case 1: Customer settles entire receivable on June 12

Case 2: Customer settles entire receivable on July 29

Case 3: Customer settles ½ of receivable on June 12 and ½ of receivable on July 29

Answer 1

Answer:	Journal Entry
	(In the books of seller)
	Gross Method
Date	Account title and explanation	Debit	Credit
Jun-03	Accounts Receivable	$                           2,000
	Sales Revenue		$                                      2,000
	(To record sales revenue)
Case 1:
Jun-12	Cash	$                           1,960		(2,000*98%)
	Sales Discount	$                                 40		(2,000*2%)
	Accounts Receivable		$                                      2,000
	(To record receipt within discount period)
Case 2:
Jun-29	Cash	$                           2,000
	Accounts receivable		$                                      2,000
	(To record receipt after discount period)
Case 3:
Jun-12	Cash	$                              980		(1000*98%)
	Sales Discount	$                                 20		(1000*2%)
	Accounts Receivable		$                                      1,000
	(To record receipt within discount period)
Jun-29	Cash	$                           1,000
	Accounts receivable		$                                      1,000
	(To record receipt after discount period)
	Net Method
Date	Account title and explanation	Debit	Credit
	Accounts receivable	$                           1,960		(2,000*98%)
	Sales Revenue		$                                      1,960
	(To record sales revenue)
Case 1:
Jun-12	Cash	$                           1,960		(2,000*98%)
	Accounts receivable		$                                      1,960
	(To record receipt within discount period)
Case 2:
Jun-29	Accounts receivable	$                                 40		(2,000*2%)
	Sales Discounts Forfeited		$                                           40
	Cash	$                           2,000
	Accounts receivable		$                                      2,000
	(To record receipt after discount period)
Case 3:
Jun-12	Cash	$                              980		(2,000*98%)
	Accounts receivable		$                                         980
	(To record receipt within discount period)
Jun-29	Accounts receivable	$                                 20		(2,000*2%)
	Sales Discounts Forfeited		$                                           20
	Cash	$                           1,000
	Accounts receivable		$                                      1,000
	(To record receipt after discount period)