Wildhorse Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2017. The goods have a sales price of $569,900 (cost of $500,000). The terms are net 30. If Danone pays within 5 days, however, it receives a cash discount of $9,900. Past history indicates that the cash discount will be taken. On January 28, 2017, Danone makes payment to Wildhorse for the full sales price.Prepare the journal entry(ies) to record the sale and related cost of goods sold for Wildhorse Company on January 2, 2017, and the payment on January 28, 2017. Assume that Wildhorse Company records the January 2, 2017, transaction using the net method.

Question
Asked Jan 30, 2019

Wildhorse Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2017. The goods have a sales price of $569,900 (cost of $500,000). The terms are net 30. If Danone pays within 5 days, however, it receives a cash discount of $9,900. Past history indicates that the cash discount will be taken. On January 28, 2017, Danone makes payment to Wildhorse for the full sales price.

Prepare the journal entry(ies) to record the sale and related cost of goods sold for Wildhorse Company on January 2, 2017, and the payment on January 28, 2017. Assume that Wildhorse Company records the January 2, 2017, transaction using the net method.

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Step 1

Transaction on 02.01.17. The credit salees made for $ 569900 with the passt histiry of allowing sales discount of $ 9900. Therefore, as per net method, sales revenue net of discount shall be recorded (i.e. 569900-9900) and debited to Accounts receivable.

Cost of goods  sold for cost of inventory sold is debited with the inventory balance get reduced. The entry is as above.

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Step 2

Transaction on 28.01.17. However, the customer has not availed the discount this time and has paid full sales price. Therefore, the cash recieved for full sales price is debited and credit shall be made of...

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