Problem 8-4

Mitchell and OBrien, CPAs, PC, earned $135,000 in revenue from providing tax return preparation services to businesses and individuals. All services are provided on account. To encourage prompt payment, the firm uses credit terms of 3/10, n/30 when billing clients.

Required:

1. Prepare the journal entry to record revenues under the gross method.

2. Prepare the journal entry to record collection of the accounts receivable, assuming clients pay within the 10-day discount period.

3. Prepare the journal entry to record collection of the accounts receivable, assuming clients pay after the 10-day discount period.