Problem 3: On February 14, 2016, Prime Company sold 50 air-conditioning units to

Question

Problem 3: On February 14, 2016, Prime Company sold 50 air-conditioning units to L&P; Heating list for $700 each, but L&P; was granted a 30% trade discount. All of Prime's sales are subject to terms 2/10, n/30. Prime uses the net method of accounting for sales discounts. and Cooling. The units Required: 1. Prepare the journal entry to record the sale. 2. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on February 22, 2016. 3. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on March 10, 2016.

Explanation / Answer

Journal Entries Sr. No. Date Account Title and explanation Debit Credit 1 Feb, 14 2016 L&P Heating & Cooling (50 X $ 700 X 70% ) $24,500        To Sales $24,500 (To Record the sales on credit less 30% trade discount) 2 Feb, 22 2016 Cash ($ 24,500 X 98%) $24,010 Purchase Discount $490                 To L&P Heating & Cooling $24,500 (To Record the recipt of the cash) 3 MAr 10, 2016 Cash $24,500                 To L&P Heating & Cooling $24,500 (To Record the recipt of the cash)

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