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On November 10 of the current year, Flores Mills sold carpet to a customer for $7,600 with credit terms 4/10, n/30. Flores uses the gross method of accounting for sales discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date

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Answer:

The correct entries are:

Dr Cash                        $7,296

Dr Sales discount         $304

Cr Accounts receivable                  $7,600

Explanation:

First and foremost, the terms of sales transaction states that 4% cash discount is given if payment is made within the next ten days.

Payment made on 17th of November is within the stipulated ten days and as a result the cash discount is allowed.

The amount to be recorded  as cash as (100%-4%)*$7600 =$7296

The balance of $304 is the sales discount allowed

The double entries would be as below:

Dr Cash               $7,296

Dr Sales discount    $304

Cr Accounts receivable     $7,600

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