On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for sales discounts. What entry would Cherokee make on December 10, assuming the correct payment was received on that date

The customer was to pay the discounted sum of $7,840.00 since the correct payment was received by Cherokee industries on the 20th of November.

Explanation:

$8000.00

Credit terms of 2/10, n/30

using the Net Discount Method for sales

2/10 means that the customer stands the chance of receiving a discount of 2% if he pay the outstanding on the invoice within 10 days of the purchases.

Therefore, Discount rate of 2% or 0.02 of $8000.00 =

$8000.00 x 0.02 = $160.00

∴ $8,000.00 - $160.00 = $7,840.00

C. Accounts receivable 7,840 Cash discounts 160 Sales 8,000

Explanation:

I think your question is missed of key information, allow me to add in and hope it will fit the original one.

a. Accounts receivable 8,000 Sales 8,000

b. Accounts receivable 7,840 Sales 7,840

c. Accounts receivable 7,840 Cash discounts 160 Sales 8,000

d. Accounts receivable 8,000 Cash discounts 160 Sales 7,840

My answer:

Given:

Materials sold = $8,000 Credit terms = 2/10, n/30

Journal Entry for record sale on 10th November

Date Account Debit Credit

Nov 10 Cash $8000

Account receivable $7840

(8000 * 98%)

Sales discount $160

So Accounts receivable 7,840 Cash discounts 160 Sales 8,000 we choose C