Early Payment Discount Jones Equipment is a private company that sells and installs HVAC systems. Jones offers payment terms of 2/10, n/30, where customers making payment within 10 days of installation will receive a discount of 2% off the purchase price or must pay the full balance due within 30 days. Jones has just received payment from a new customer who paid within the 10-day window and is thus entitled to the 2% discount. The gross sales price of the equipment and installation, before discount, was $10,000. This discount will not result in a loss to Jones on the sale of the product and service. Jones needs your help to determine when the 2% early-payment discount should be recognized and how it should be recorded-for example, as a reduction in revenue or as a cost of sales? 1. Citing from the guidance as support, show the approximate journal entries that Jones would make upon instal- lation of the equipment and upon receipt of customer payment. 2. Explain how you located the relevant guidance, including the search method used and which section you searched within the appropriate topic.

Early Payment Discount Jones Equipment is a private company that sells and installs HVAC systems. Jones offers payment terms of 2/10, n/30, where customers making payment within 10 days of installation will receive a discount of 2% off the purchase price or must pay the full balance due within 30 days. Jones has just received payment from a new customer who paid within the 10-day window and is thus entitled to the 2% discount. The gross sales price of the equipment and installation, before discount, was $10,000. This discount will not result in a loss to Jones on the sale of the product and service. Jones needs your help to determine when the 2% early-payment discount should be recognized and how it should be recorded-for example, as a reduction in revenue or as a cost of sales? 1. Citing from the guidance as support, show the approximate journal entries that Jones would make upon instal- lation of the equipment and upon receipt of customer payment. 2. Explain how you located the relevant guidance, including the search method used and which section you searched within the appropriate topic.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 29E

See similar textbooks

Similar questions

Premium Obligation Yummy Cereal Company is offering one toy shovel set for 15 box tops of its cereal. Year-to-date sales have been off, and it is hoped that this offer will stimulate demand. Each shovel set costs the company 3. The following data are available for the last 3 months of 2019: It is estimated that only 70% of the box tops will be redeemed. The cereal sells for 2.80 per box. Required: 1. Prepare journal entries for each month to record sales, shovel set purchases, and redemptions. 2. Assuming Yummy prepares monthly financial statements, indicate how the inventory of premiums and the estimated liability would be disclosed on Yummys ending balance sheets for October, November, and December.
Cash Rebates On January 1, 2020, Fro-Yo Inc. began offering customers a cash rebate of 5.00 if the customer mails in 10 proof-of-purchase labels from its frozen yogurt containers. Eased on historical experience, the company estimates that 20% of the labels will be redeemed. During 2020, the company sold 5,000,000 frozen yogurt containers at 1 per container. From these sales, 800,000 labels were redeemed in 2020, 150,000 labels were redeemed in 2021, and the remaining labels were never redeemed. Required: 1. Prepare the journal entries related to the sale of frozen yogurt and the cash rebate offer for 2020 and 2021. 2. Next Level Assume that 300,000 labels were redeemed in 2021. Prepare the journal entries related to the cash rebate offer for 2021.
Unearned Sales Revenue Curtiss Carpet Cleaning normally charges $90 to clean one room of carpeting. During the holiday season, Curtis offers a promotion to clean the customers carpet 10 times at a discounted rate if the customer pays $600 in advance. Required: Make the journal entry to record the following transactions. 1. A customers prepayment of $600 2. Curtiss cleaning of the carpet one time
Airplanes Unlimited purchases airplane parts from a supplier on March 19 at a quantity of 4,800 parts at $12.50 per part. Terms of the purchase are 3/10, n/30. Airplanes pays one-third of the amount due in cash on March 30 but cannot pay the remaining balance due. The supplier renegotiates the terms on April 18 and allows Airplanes to convert its purchase payment into a short-term note, with an annual interest rate of 9%, payable in six months. Show the entries for the initial purchase, the partial payment, and the conversion.
Captain Whitman Ship Supplies offers terms of 3/15, net 45. If a purchaser takes the discount and pays on the 10th day, what is the nominal cost of trade credit? Now suppose a purchaser actually pays on the 20th day but still takes the discount. What is the actual nominal cost of the trade credit?
Barkers Baked Goods purchases dog treats from a supplier on February 2 at a quantity of 6,000 treats at $1 per treat. Terms of the purchase are 2/10, n/30. Barkers pays half the amount due in cash on February 28 but cannot pay the remaining balance due in four days. The supplier renegotiates the terms on March 4 and allows Barkers to convert its purchase payment into a short-term note, with an annual interest rate of 6%, payable in 9 months. Show the entries for the initial purchase, the partial payment, and the conversion.
Installment Sale Baileys Billiards sold a pool table to Sheri Sipka on October 31, 2020. The terms of the sale are no money down and payments of $50 per month for 30 months, with the first payment due on November 30, 2020. The table they sold to Sipka cost Baileys $800, and Bailey uses a perpetual inventory system. Baileys uses an interest rate of 12% compounded monthly (1% per month). Required: Note: Round answers to two decimal places. 1. Prepare the cash flow diagram for this sale. 2. Calculate the amount of revenue Baileys should record on October 31, 2020. 3. Prepare the journal entry to record the sale on October 31. Assume that Baileys records cost of goods sold at the time of the sale (perpetual inventory accounting). 4. Determine how much interest income Baileys will record from October 31, 2020, through December 31, 2020, 5. Determine how much Baileys 2020 income before taxes increased by this sale.
Pianos Unlimited sells pianos to customers. The company contracts with a supplier who provides it with replacement piano keys. There is an agreement that Pianos Unlimited is not required to provide cash payment immediately, and instead will provide payment within thirty days of the invoice date. Additional information: Pianos Unlimited purchases 400 piano keys for $7 each on September 1, invoice date September 1, with discount terms 2/10, n/30. Pianos Unlimited returns 150 piano keys (receiving a credit amount for the total purchase price per key of $7 each) on September 8. The company purchases an additional 230 keys for $5 each on September 15, invoice date September 15, with no discount terms. The company pays 50% of the total amount due to the supplier on September 24. What amount does Pianos Unlimited still owe to the supplier on September 30? What account is used to recognize this outstanding amount?
Cash discount versus loan The Wood Connection decides to offer cash discounts to its regular credit customers, provided that the credit customers have a proven track record of on-time payment. The Wood Connection is offering Monkey Suppliers a discount on its credit purchases. The credit term offered is 2/10 net 60. Should Monkey Suppliers take the discount if a short-term loan can be obtained at 9%? (Note: Assume a 365-day year.)
A retailer owes a wholesaler $700,000 due in 45 days. If the payment is 15 days late, there is a 1% penalty charge. Since the bill isn't due immediately, the retailer can invest the $700,000 in a certificate of deposit and make money on the interest. The retailer has two options: a 45-day certificate of deposit (CD) earning 8% per year simple interest or a 60-day certificate earning 9% per year simple interest. How much interest would the retailer earn? Use 360 days in a year. (Round your answers to the nearest cent.) 45-day certificate $ 60-day certificate $ If the retailer opts for the 60-day certificate of deposit, he will be late on his payment to the wholesaler. How much will the penalty be if he is late on his payment to the wholesaler? $ How much will the retailer make in total if he opts for the 60-day certificate and has to pay the penalty out of the proceeds of the interest earned on the CD? (Round your answer to the nearest cent.) $ Is it better to take the 45-day…
A supplier grants credit terms of 1/5, net 30. What is the effective annual rate of the discount on a purchase of $5,000?
RATIONAL DISCOUNT A person pays $ 2,000.00 for a debt that expires within 3 months, knowing that a 4% discount was applied every two months with a monthly update. What is the rational discount?RATIONAL DISCOUNT A person pays $ 2,000.00 for a debt that expires within 3 months, knowing that a 4% discount was applied every two months with a monthly update. What is the rational discount? Please answer quickly I will provide you positive response