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 20 days later?
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 is an $800 debit to Cash and an $800 credit to Accounts Receivable because the payment is made after the discount period (2/10,n/30) has expired, so no sales discount applies. The defective merchandise return reduces the original amount from $1,000 to $800, and this is the amount settled.

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