Sheffield Corp. sells merchandise on account for $2700 to Morton Company with cr

Question

Sheffield Corp. sells merchandise on account for $2700 to Morton Company with credit terms of 2/10, n/30. Morton Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Sheffield Corp. make upon receipt of the check?

Cash 2100 Accounts Receivable 2100

Cash 2058 Sales Returns and Allowances 642 Accounts Receivable 2700

Cash 2058 Sales Returns and Allowances 600 Sales Discounts 42 Accounts Receivable 2700

Cash 2646 Sales Discounts 54 Sales Returns and Allowances 600 Accounts Receivable 2100

Explanation / Answer

Answer is C

The entry Sheffield Corp. make upon receipt of the check:

General Journal Debit Credit Cash[($2,700 - $600) × 0.98] $2,058 Sales Returns and Allowances $600 Sales Discounts $42 Accounts Receivable $2,700

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