Exercise 6 - 3: On December 12, Woodington sold goods on account for a gross pri
ID: 2447583 • Letter: E
Question
Exercise 6 - 3:
On December 12, Woodington sold goods on account for a gross price of $40,000. The terms of the sale were 2/10, n/30. As of December 31, when financial statements were prepared, no payment had been received by Woodington. Full payment was received on January 5 of the following year.
1. Prepare journal entries for these transactions.
2. Assume that full payment was received on December 20. Prepare journal entries and discuss how the timing of the cash receipt affected the income statement and statement of cash flows.
Explanation / Answer
Question 1. Date Account Title Debit Cridit 12.Dec 20x1 Accounts Receivable 40000 Sales 40000 05.Jan 20x2 Cash 40000 Accounts Receivable 40000 Question 2. Date Account Title Debit Cridit 12.Dec 20x1 Accounts Receivable 40000 Sales 40000 20.Dec 20x1 Cash 39200 Cash Discount Received 800 Sales 40000 the term 2/10, n/30 is a defined asn 2% cash discount on the sales amount will be given if cash is paid within 10 days. And if not cash is to be paid with is 30 days.