Exercise 5-63 Effects of Sales Discounts Citron Mechanical Systems makes all sal
ID: 2330235 • Letter: E
Question
Exercise 5-63 Effects of Sales Discounts Citron Mechanical Systems makes all sales on credit, with terms 1/15, n/30. During 2019, the list price (prediscount) of services provided was $687,500. Customers paid $482,000 (list price) of these sales within the discount period and the remaining $205,500 (list price) after the discount period. Citron uses the gross method of recording sales. Required: 1. Compute the amount of sales that Citron recorded for 2019. 2. Compute the amount of cash that Citron collected from these sales. 3.Assuming the net method was used for all sales, prepare a summary journal entry to record these sales and a second summary entry to record the cash collected. If an amount box does not require an entry, leave it blank. Record sale Record collection within discount periodExplanation / Answer
Answers
Working
Sales, the amount of which received within discount period
Sales, the amount of which received after discount period
Total
A
Sales [List Price]
$ 482,000.00
$ 205,500.00
$ 687,500.00
B
Discount rate
1%
1%
C
Payment received within discount period?
YES
NO
D = A x B
Amount of discount
$ 4,820.00
$ -
$ 4,820.00
E = A - D
Net Cash Collected
$ 477,180.00
$ 205,500.00
$ 682,680.00
Amount of Sales = $ 687,500
Amount of Cash Collected = $ 682,680
Accounts title
Debit
Credit
Working
Accounts receivables
$ 680,625.00
[Total Sales - 1%: $687,500 - 1% = $680,625
Sales revenue
$ 680,625.00
(Sales recorded, net of discount)
Cash
$ 682,680.00
[Cash received, calculated in working]
Discount on Sale Lost or Sales Discount forfeited
$ 2,055.00
[$ 205,500 x 1%]
Accounts receivables
$ 680,625.00
[Amount of receivables realized]
(Cash received, and discount lost of payment received after discount period)
Working
Sales, the amount of which received within discount period
Sales, the amount of which received after discount period
Total
A
Sales [List Price]
$ 482,000.00
$ 205,500.00
$ 687,500.00
B
Discount rate
1%
1%
C
Payment received within discount period?
YES
NO
D = A x B
Amount of discount
$ 4,820.00
$ -
$ 4,820.00
E = A - D
Net Cash Collected
$ 477,180.00
$ 205,500.00
$ 682,680.00