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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Sales Discounts Taken

Refer to the information for Bolton above.

Required:

Prepare the journal entry to record the sale. Then prepare the journal entry assuming the payment is made within 10 days (within the discount period).

To determine

Sales discounts:

The term 1/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 1% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The journal entry for the receiving payment within 10 days.

Explanation

The service contract has a price of $37,000 and the payment is received in 10 days and the discount for the early payment is 1%. This is given in the question.

The journal entry for Bolton is as follows:

Date Particulars Debit ($) Credit ($)
Accounts Receivable……………………Sales…………………………………(Record the sales)Cash………………………………Sales discount…………………….Accounts Receivable………………(Record the receiving of revenue of service contact within the discount period of    10 days) 37,000

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