On December 1 Macy Company sold merchandise with a selling p

On December 1, Macy Company sold merchandise with a selling price of $1000 on account to Mrs. Jorgensen, with terms 3/10, n/30. Mrs. Jorgensen paid the amount due on December 9. Which journal entry should Macy Company prepare on December 9?

Solution

Macy Company

Journal

Terms 3/10, n/30 imply that 3% discount will be allowed if payment is made within 10 days and no discount will be allowed if payment is made after 10 days. Since goods were sold on December 1 and payment was made on December 9, hence 3% discount will be allowed to Mrs. Jorgensen.

Discount allowed = 1,000 x 3%

= $30

Hence, net cash received = 1,000 - 30

= $970