Belkin Company offers a cash discount of 2% if payment is received within 15 days, with full payment due in 30 days. Belkin sold some merchandise to Alvarez Company for $10,000 on June 1.
1. Suppose that on June 14, Alvarez Company paid the appropriate amount to Belkin.
a. Prepare Belkin Company’s journal entries on June 1 and June 14 assuming that Belkin used the gross method to account for cash discounts.
b. Prepare Belkin Company’s journal entries on June 1 and June 14 assuming that Belkin used the net method to account for cash discounts.
2. Suppose instead, that on June 30 Alvarez Company paid the appropriate amount to Belkin.
a. Prepare Belkin Company’s journal entries on June 1 and June 30 assuming that Belkin used the gross method to account for cash discounts.
b. Prepare Belkin Company’s journal entries on June 1 and June 30 assuming that Belkin used the net method to account for cash discounts.