On June 3, Crane Company sold to Chester Company merchandise having a sale price of $5,600 with...

Question:

On June 3, Crane Company sold to Chester Company merchandise having a sale price of $5,600 with terms of 3/10, n/60, f.o.b. shipping point. An invoice totaling $95, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company.

Required:

a. Prepare journal entries on the Crane Company books to record all the events noted above under each of the following bases:

(1) Sales and receivables are entered at gross selling price.

(2) Sales and receivables are entered at net of cash discounts.

b. Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment until July 29.

Purchase Accounting & Discounts:

There are an infinite number of terms under which a company can buy and sell goods and services on credit. A common set of terms is 2/10 n/30 which is read as "two ten net thirty". What this means is that if the balance of the payment is received within 10 days then the customer will get a 2% discount on the sale price, but if they do not pay the full amount in 10 days then the full balance is due in thirty days.

Answer and Explanation: 1

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a. (1) To record the transactions at gross we can first ignore the available discounts.

For the sale of goods:

AccountDebitCredit
Dr.Accounts...

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Purchases Journal: Definition & Example

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Chapter 1 / Lesson 22
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Explore purchase journals in accounting. Learn the definition of a purchase journal and understand its different entries. Discover purchase journal examples.


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