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20 December, 09:13

Exercise 7-6 (Algo) Cash discounts; the gross method [LO7-3] Harwell Company manufactures automobile tires. On July 15, 2021, the company sold 1,100 tires to the Nixon Car Company for $60 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, 2021. 2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on August 15, 2021.

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  1. 20 December, 10:37
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    Answer and Explanation:

    1. Journal Entries

    July 15 Accounts Receivable $66,000

    Sale Revenue $66,000

    July 23 Cash $64,680

    Sales discount 1320

    Accounts Receivable 66,000

    2. Journal Entries

    July 15 Accounts Receivable $66,000

    Sale Revenue $66,000

    August 15 Cash $66,000

    Accounts Receivable 66,000
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