Oswego Clay Pipe Company sold $45,400 of pipe to Southeast Water District #45 on

Question

Oswego Clay Pipe Company sold $45,400 of pipe to Southeast Water District #45 on April 12 of the current year with terms 2/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date? Cash 46,308 Accounts receivable 45,400 Interest revenue 908 45,400 Accounts receivable 44,492 Discounts receivable 908 Cash 45,400 Accounts receivable 44,492 Interest revenue 908 Cash 45,400 Accounts receivable 45,400

Explanation / Answer

Since south Water district made the payment after the discount period which is 2/15 ( 2% discount if paid within 15 days) he cannot avail cash discount and would be required to pay full amount of $45,400 so correct entry Cash 45,400 Accounts receivable 45,400

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