On December 1, 2019, Lynch Incorporated sold $17,000 of merchandise with terms 2/10, n/EOM. On December 11, 2019, collections were made on sales originally billed for $10,000, and on December 31, 2019, additional collections on sales originally billed for $6,000 were received. Required:1.Prepare the journal entries to record the sale, collections, and any required year-end adjustments assuming that Lynch records accounts receivable and sales at (a) the gross price and (b) the net price.2.Next Level Assume that Lynch’s customer does not have the available cash to pay Lynch within the discount period. How much interest should the customer be willing to pay for a loan to permit them to take advantage of the discount period (assume no additional costs to the loan)?3.Next Level Explain why Lynch’s granting of cash (sales) discounts may improve cash flow. CHART OF ACCOUNTSLynch IncorporatedGeneral Ledger ASSETS111Cash121Accounts Receivable141Inventory152Prepaid Insurance181Equipment198Accumulated Depreciation LIABILITIES211Accounts Payable231Salaries Payable250Unearned Revenue261Income Taxes Payable EQUITY311Common Stock331Retained Earnings REVENUE411Sales Revenue EXPENSES500Cost of Goods Sold511Insurance Expense512Utilities Expense521Salaries Expense532Bad Debt Expense540Interest Expense541Depreciation Expense559Miscellaneous Expenses910Income Tax Expense 16. Prepare the journal entries to record the sale, collections and any required year-end adjustments assuming that Lynch records accounts receivable and sales at the net price.General Journal InstructionsPAGE 1GENERAL JOURNALDATEACCOUNT TITLEPOST. REF.DEBITCREDIT12568Adjusting Entries10 1a. Prepare the journal entries to record the sale, collections and any required year-end adjustments assuming that Lynch records accounts receivable and sales at the gross price.General Journal InstructionsPAGE 1GENERAL JOURNALDATEACCOUNT TITLEPOST. REF.DEBITCREDIT126716. Prepare the journal entries to record the sale, collections and any required year-end adjustments assuming that Lynch records accounts receivable and sales at the net price.General Journal Instructions

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Description: On December 1, 2019, Lynch Incorporated sold $17,000 of merchandise with terms 2/10, n/EOM. On December 11, 2019, collections were made on sales originally billed for $10,000, and on December 31, 2019, additional collections on sales originally bille

Journal is the book of original entry in which all the financial transactions of the business are…

Answered: On December 1, 2019, Lynch Incorporated…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter5: Accounting For Retail Businesses

Section: Chapter Questions

Problem 35E: Appendix 1 Adjusting entry for gross method The following data were extracted from the accounting...

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On December 1, 2019, Lynch Incorporated sold $17,000 of merchandise with terms 2/10, n/EOM. On December 11, 2019, collections were made on sales originally billed for $10,000, and on December 31, 2019, additional collections on sales originally billed for $6,000 were received.

	Required:
1.	Prepare the journal entries to record the sale, collections, and any required year-end adjustments assuming that Lynch records accounts receivable and sales at (a) the gross price and (b) the net price.
2.	Next Level Assume that Lynch’s customer does not have the available cash to pay Lynch within the discount period. How much interest should the customer be willing to pay for a loan to permit them to take advantage of the discount period (assume no additional costs to the loan)?
3.	Next Level Explain why Lynch’s granting of cash (sales) discounts may improve cash flow.

CHART OF ACCOUNTS

Lynch Incorporated

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

16. Prepare the journal entries to record the sale, collections and any required year-end adjustments assuming that Lynch records accounts receivable and sales at the net price.
General Journal Instructions
PAGE 1
GENERAL JOURNAL
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
1
2
5
6
8
Adjusting Entries
10

1a. Prepare the journal entries to record the sale, collections and any required year-end adjustments assuming that Lynch records accounts receivable and sales at the gross price.
General Journal Instructions
PAGE 1
GENERAL JOURNAL
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
1
2
6
7
16. Prepare the journal entries to record the sale, collections and any required year-end adjustments assuming that Lynch records accounts receivable and sales at the net price.
General Journal Instructions

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