A company sells merchandise for $1,000 on account with terms of 2/10, n/30. Defe

Question

A company sells merchandise for $1,000 on account with terms of 2/10, n/30. Defective merchandise of $200 is returned 2 days later. Which of the following ent?es would be made to record the cash receipt for the sale if the payment is received within 10 days? The accounting entry would be an $800 debit to Cash, a $16 credit to Sales discounts and a $784 credit to Accounts receivable. The accounting entry would be an $800 debit to Cash and an $800 credit to Accounts receivable. The accounting entry would be a $784 debit to Cash, a $16 debit to Sales discounts and an $800 credit to Accounts receivable. The accounting entry would be a $16 debit to Sales discounts, an $800 debit to Cash and an $816 credit to Accounts receivable. Referring to the following table, what is Net sales revenue? Referring to the following table, what is Gross profit?

Explanation / Answer

Hi, Answers are as follows: 1. C Explanation: Cash received by the vendor would be 784 (800 - 800*.02) where 800*.02 is discount. 200 is excluded from the calculation since defective goods were returned within 2 days from the date of sale and before making payment. 2. Answer is 425000 calculated as follows: Sales Revenue - Sales Discounts - Sales Returns and Allowances 3. Using Net Sales figure in point 2, gross profit can be calculated as follows: Gross Profit= Net Sales - COGS 425000 - 300000 = 125000 Thanks, Aman

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