A company sells merchandise for $1,000 on account with terms of 2/10,n/30.Defective merchandise of $200 is returned 2 days later.Which of the following entries would be made to record the cash receipt for the sale if the payment is received within 10 days?
A) The accounting entry would be an $800 debit to Cash and an $800 credit to Accounts receivable.
B) The accounting entry would be a $784 debit to Cash, a $16 debit to Sales discounts and an $800 credit to Accounts receivable.
C) The accounting entry would be a $16 debit to Sales discounts, an $800 debit to Cash and an $816 credit to Accounts receivable.
D) The accounting entry would be an $800 debit to Cash, a $16 credit to Sales discounts and a $784 credit to Accounts receivable.

Question

Quizplus · Accepted Answer

The correct entry reflects the customer taking advantage of the 2% discount on the adjusted price ($800) after returning defective merchandise. Thus, $800 - 2% of $800 ($16) = $784 is the cash received, and the $16 is the sales discount, which reduces the accounts receivable by the total of $800.

A Company Sells Merchandise for $1,000 on Account with Terms