Question
Sales Discounts (Appendix 5A) Sims Company regularly sells merchandise to Lauber Supply on terms 2/15, n/30 and records sales at gross. During a recent month,
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Sales Discounts (Appendix 5A)
Sims Company regularly sells merchandise to Lauber Supply on terms 2/15, n/30 and records sales at gross. During a recent month, the two firms engaged in the following transactions:
- Sims sold merchandise with a list price of $32,800.
- Sims sold merchandise with a list price of $48,000.
- Lauber paid for the purchase in Transaction a within the discount period.
- Lauber paid for the purchase in Transaction b after the discount period.
Required:
1. Provide the journal entries for Sims to record the sales in Transactions a and b.
(a) - Accounts Payable
- Accounts Receivable
- Cash
- Sales Discounts
- Sales Revenue
- Accounts Payable
- Accounts Receivable
- Cash
- Sales Discounts
- Sales Revenue
Record sale (b) - Accounts Payable
- Accounts Receivable
- Cash
- Sales Discounts
- Sales Revenue
- Accounts Receivable
- Cash
- Sales Discounts
- Sales Returns and Allowances
- Sales Revenue
Record sale 2. Provide the journal entry to record the receipt of Lauber's payment in Transaction c. If an amount box does not require an entry, leave it blank.
(c) - Accounts Payable
- Accounts Receivable
- Cash
- Sales Revenue
- Unearned Sales Revenue
- Accounts Payable
- Accounts Receivable
- Allowance for Doubtful Accounts
- Cash
- Sales Revenue
- Accounts Payable
- Accounts Receivable
- Cash
- Sales Discounts
- Sales Revenue
Record collection of cash within discount period 3. Provide the journal entry to record the receipt of Lauber's payment in Transaction d.
(d) - Accounts Payable
- Accounts Receivable
- Cash
- Sales Discounts
- Sales Revenue
- Accounts Payable
- Accounts Receivable
- Cash
- Notes Receivable
- Sales Revenue
Record collection of cash after discount period 4. Conceptual Connection: What implied annual interest rate is Lauber incurring by failing to take the sales discount and, instead, paying the gross amount after 30 days? Assume a 365 day year and round the percentage to one decimal. %
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