Tracy Company, a manufacturer of air conditioners, sold 200 units to Thomas Company on November 17, 2021. The units have a list price of $660 each, but Thomas was given a 25% trade discount. The terms of the sale were 2/10, n/30. Required: 1. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the gross method of accounting for cash discounts is used.

Explanation:

The journal entries are shown below:

On November 17

Account receivable A/c Dr  $99,000

                To Sales revenue A/c $99,000

(Being the goods are sold on credit)

The computation is

= 200 units × $660 × (1 - 0.25)

= $99,000

On November 26

Cash A/c Dr                   $97,020

Sales Discount A/c Dr $1,980

     To  Accounts receivable    $99,000

(Being cash received recorded)

The computation of the discount would be

= Accounts receivable × given percentage

= $99,000 × 2%

= $1,980

The remaining amount would be debited to the cash account.

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