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11 May, 12:19

Pharoah Co. uses the gross method to record sales made on credit. On June 1, 2017, it made sales of $50,400 with terms 3/15, n/45. On June 12, 2017, Pharoah received full payment for the June 1 sale. Prepare the required journal entries for Pharoah Co.

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  1. 11 May, 15:52
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    Journal entries for Pharoah Co.

    On June 1, 2017, when it made the Sale, the Journal entries are as follows:

    Trade Receivables $ 50,400 (debit)

    Revenue $ 50,400 (credit)

    Being Recognition of Sale

    On June 12, 2017, when Pharoah Co, received full payment for the June 1 sale

    Discount Allowed $ 1,512 (debit)

    Trade Receivables $ 1,512 (credit)

    Being Discount Allowed Recognised with Payment

    Cash $ 48,888 (debit)

    Trade Receivables $ 48,888 (credit)

    Being Discount Allowed Recognised with Payment

    Explanation:

    journal entries for Pharoah Co.

    Pharoah Co. offers a 3% cash discount when the full payment is received within 15 days, 45 days being the settlement days for all sells on Account according to their terms of 3/15, n/45

    On June 1, 2017, when it made the Sale, the Journal entries are as follows:

    Trade Receivables $ 50,400 (debit)

    Revenue $ 50,400 (credit)

    On June 12, 2017, when Pharoah Co, received full payment for the June 1 sale

    Payment falls within the 15 days in which Pharaoh gives a cash discount. Thus the payment qualifies for a cash discount.

    Discount Allowed $ 1,512 (debit)

    Trade Receivables $ 1,512 (credit)

    Being Discount Allowed Recognised with Payment

    Cash $ 48,888 (debit)

    Trade Receivables $ 48,888 (credit)

    Being Discount Allowed Recognised with Payment
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