E7.5B (L0 2)

(Record Sales Gross and Net)

On June 3, Patel Company sold to Pham Inc. merchandise having a sale price of $1,500 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $45, terms n/30, was received by Pham on June 8 from the John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Pham.

Instructions

(a) Prepare journal entries on the Patel 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.

(b) Prepare the journal entry under basis 2, assuming that Pham did not remit payment until July 29.