Eastman Corporation sells merchandise with a list price of $$16,000$ on February $1,2019,$ with terms of $1/10,$ n$/30.$ On February $10,2019,$ payment was received on merchandise originally billed for $$6,500,$ and the balance due was received on March $1,2019.$Eastman Corporation sells merchandise with a list price of $$16,000$ on February $1,2019,$ with terms of $\frac{1}{10},\frac{n}{30}.$

On February $10,2019,$ payment was received on merchandise originally billed for $$6,500,$ and the balance due was

received on March $1,2019.$

Required:

Prepare the joumal entries to record the preceding information assuming that Eastman records

accounts receivable and sales at $($a$)$ the gross price and $($b$)$ the net price.

Next Level What implied annual interest rate is Eastman's customer incurring by failing to take the cash

$($sales$)$ discount? $($Assume a $365-$day year.$)$

Next Level Which method$-$recording accounts receivable at the gross price or net price$-$is

theoretically superior? Why?What implied annual interest rate is Eastman's customer incurring by faing to take the cash $($sales$)$ discount? $($Assume

a $365-$day year.$)$

Additional Instruction

With a discount rate of $1\%$ and assuming a $365-$day year, Eastman's customer is incurring an annual interest rate of

Which method$-$recording accounts receivable at the gross price or net price$-$is theoretically superior? Why?

Recording receivables at the $,$ is the theoretically superior method because it values the receivable at

the net realizable value and reports sales revenue at the amount that a company expects to be entitled. If receivables

are recorded at their

$.,$ sales revenue is overstated.

Required:

$1.$ Prepare the journal entries to record the preceding information assuming that Eastman records accounts receivable and sales at $($a$)$ the gross price and $($b$)$ the net price.

$2.$ Next Level What implied annual interest rate is Eastman$$s customer incurring by failing to take the cash $($sales$)$ discount? $($Assume a $365-$day year.$)$

$3.$ Next Level Which method$$recording accounts receivable at the gross price or net price$$is theoretically superior? Why?