On June 3, Ivanhoe Company sold to Chester Company merchandise having a sale price of $4,200 with terms of 2/10, n/60, f. o.b. shipping point. An invoice totaling $94, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company. Collapse question part (a) Prepare journal entries on the Ivanhoe Company books to record all the events noted above under each of the following bases. (1) Sales and receivables are entered at gross selling price. (2) Sales and receivables are entered at net of cash discounts

On June 3: Debit Account receivable with $4,200; and Credit Sales revenues also wit $4,200.

On June 12: Debit Cash with $4,116, Debit Sales discount with $84; and Credit Account receivable with $4,200.

Explanation:

Ivanhoe Company

Date                  Details                                  Dr ($)               Cr ($)  

June 3               Account receivable            4,200

                         Sales revenues                                           4,200

                         To record sales on terms to Chester Company    

June 12              Cash                                    4,116

                          Sales discount                       84

                          Account receivable                                   4,200

                          To record cash paid and sales discount to Chester

Note:

Chester Company paid within the discount period of 10 days. Therefore, he is entitled to discount of 2% and the cash paid and discount are calculated as follows:

Discount = $4,200 * 2% = 84%

Cash paid = $4,000 - $84 = $4,116

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