Cycle Wholesaling sells merchandise on credit terms of 2/10, n/30. A sale for $800 (cost of goods sold of $500) was made to Sarah's Cycles on February 1. Assume Cycle Wholesaling uses a perpetual Inventory system.
1. Prepare the journal entry Cycle Wholesaling would make to record the sale to Sarah's Cycles.
2. Prepare the journal entry to record the collection of the account, assuming it was collected in full on February 9.
3. Prepare the journal entry, assuming, instead, that the account was collected in full on March 2.
4. Calculate the gross profit percentage for the sale to Sarah's Cycles, assuming the account was collected in full on February 9.
The recording of the revenue, expense, loss, drawing, capital invested, bad debt and inventory, etc. of a business or firm in a perfect format and order by an accountant is called a journal entry.
Answer and Explanation: 1
1. Statement showing Journal Entry:
|Feb. 1||Account Receivable||$800|
|(To record sales to Sarah's...|
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fromChapter 9 / Lesson 7
Understand the meaning of gross profit in accounting. Discover the formula for calculating gross profit and explore some examples of gross profit calculation.