On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts what are the journal entries to recorded the trnascations.

Question

Business

Charlie Walter

3 May, 05:08

On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts what are the journal entries to recorded the trnascations.

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Isabel · Answer 1

The journal entry is shown below:

1. Accounts receivable A/c Dr $160

To Sales discounts forfeited $160

(Being sales discount is recorded)

The computation of the sales discount is shown below:

= (Sales value - payment made) * discount rate

= ($40,000 - $24,000) * 1%

= $160

2. Cash A/c Dr $16,000

To Accounts receivable A/c $16,000

(Being cash is received)