Question

Landon jewelers uses the perpetual inventory system. on april​ 2, landon sold merchandise with a cost of​ $2,500 for​ $7,000 to a customer on account with terms of​ 3/15, n/30. the journal entry to record the cost of goods sold would​ be:

Answer 1

Dr Cash $6,790

Dr Sales discount $210

Cr Accounts Receivable $7,000

Step-by-step explanation:

Cost of goods sold by Landon Jewelers is $7,000

The cost is subject to 3/15, n/30 meaning that 3% will discount will be applicable if payment is made in 15 days. Where the balance is not paid within 15 days, it must however be paid within 30 days.

Since payment was made to Landon Jewelers within the 15 days grace, 3% deduction will be applicable to the payment.

Therefore Sales discount would be ;

= $7,000 × 3%

=$210

Balance paid in cash would be;

=$7,000 - $210

=$6,790

Journal entry for cost of goods sold would be;

Dr Cash $6,790

Dr Sales discount $210

Cr Accounts Receivable $7,000

Sales discount is an expense hence debited while the whole amount is credited to accounts receivable.