Effects of Discounts on Sales and Purchases
Smithson Products sells legal supplies to law firms. Gross sales in 2019 were $2,750,600 (Smithson’s list price) on terms 3/10, n/30. Customers paid for $2,427,900 (Smithson’s list price) of the merchandise within the discount period and the remaining $322,700 after the end of the discount period. Smithson records purchases and sales using the gross method to account for sales discounts.
Required:
1. Determine how much cash was collected from sales.
2. Assuming all payments were received before year end, how much sales revenue will be reported on the income statement?
(a)
Sales discounts:
The term
To calculate:
The amount of cash to be collected from sales.
The Smithson Products ells legal supplies for
(b)
Sales discounts:
The term
To calculate:
The sales revenue to be recognized on the income statement.
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