Problem: Explain Gross method and Net method of recording sales discount allowed to account receivables.
Give general journal entries for the following transactions separately for gross and Net methods of collecting account receivables.
I (a)Gross method assuming that the Payment is made within discount period
Jan 1 2006 A corporation sold inventory to a customer on open account at an invoice price of $6,000; terms 3/10, n/30;
Jan 9 2006:the customer paid the invoice within the discount period.
1 (b) Gross method assuming that the payment is not made within discount period.
Jan 1,2006: Corporation sold inventory to a customer on open account at an invoice price of $6,000; terms 3/10, n/30;
Jan 15 2006:the customer paid the invoice(Not within the discount period).
2 (a) Net method assuming that payment is made within the discount period.
Jan 1,2006: A corporation sold inventory to a customer on open account at an invoice price of $6,000; terms 3/10, n/30;
Jan 9,2006:the customer paid the invoice within the discount period.
Illustration on Net method assuming that the Payment is not made within discount period.
2 (b) Net method assuming that payment is not made within the discount period.
Jan 1,2006: Corporation sold inventory to a customer on open account at an invoice price of $6,000; terms 3/10, n/30;
Jan 15 2006: the customer paid the invoice (Not within the discount period).