Brief Exercise 7-2 Stellar Co. uses the gross method to record sales made on cre

Question

Brief Exercise 7-2 Stellar Co. uses the gross method to record sales made on credit. On June 1, 2017, it made sales of $62,100 with terms 4/15, n/45. On June 12, 2017, Stellar received full payment for the June 1 sale. Prepare the required journal entries for Stellar Co. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit June 1 une 12 SHOW LIST OF ACCOUNTS LINK TO TEXT

Explanation / Answer

JOURNAL ENTRIES FOR STELLER CO.

1ST JUNE, 2017

ACCOUNT TITLE DEBIT CREDIT

CUSTOMER A/C 62100

SALES A/C 62100

EXPLANATION ; - As company uses Gross Methode to record Sales, It will be recorded at the full value without considering the amount of possible discount that may have to be offered to customer for Prompt Payment.

12TH JUNE, 2017

ACCOUNT TITLE DEBIT CREDIT

CASH / BANK A/C 59616

DISCOUNT A/C 2484

CUSTOMER A/C 62100

EXPLANATION ; -

Sales were made on Terms of 4/15, n/45. This Means Discount of 4% will be Given if Payment is received with in 15 Days, But beyond 15 Days and up to 45 Days there will be no discount.

Means Genral Credit Periode is 45 Days although discount of 4% is offered if payment is made with in 15 Days.

As payment is received In 12 Days Discount will be offered

Discount = 62100 X 4%

= 2484 $

(This Shoud be Debited to Discount A/c as an Expense )

Payment Received

= Sales - Discount

= 62100 - 2484

= 59616 $

(This will Be Debited to Cash or Bank A/c)

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