Harwell Company manufactures automobile tires. On July 15, 2018, the company sold 1,000 tires to the Nixon Car Company for $50 each. The terms of the sale were 2/10, n/30. Harwell uses the gross method of accounting for cash discounts.

Required:

1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on July 23, 2018.

2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on August 15, 2018.

Record the sale of 1,000 tires for $50 each with a term of 2/10, n/30 under the gross method of accounting for cash discounts.

The journal entries are shown below:

1. On July 15

Accounts receivable A/c Dr $50,000 (1,000 tires * $50)

To Sales revenue A/c $50,000

(Being service provided is recorded)

On July 23

Cash A/c Dr $49,000

Sales Discount A/c Dr $1,000

To Accounts receivable $50,000

(Being cash received recorded)

The discount would be

= Accounts receivable * percentage given

= $50,000 * 2%

= $1,000

The remaining amount would be credited to the cash account.

2. On July 15

Accounts receivable A/c Dr $50,000 (1,000 tires * $50)

To Sales revenue A/c $50,000

(Being service provided is recorded)

On August 15

Cash A/c Dr $50,000

To Accounts receivable A/c $50,000

(Being cash collected is recorded)