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14 July, 22:11

arter Company sells merchandise on account for $4,000 to Hannah Company with credit terms of 2/10, n/30. Hannah Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Carter Company make upon receipt of the check?

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  1. 15 July, 00:42
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    The answers are:

    Cr Accounts receivable $4,000 Dr $3,332 Cash Dr $68 Sales discount Dr $600 returned merchandise (damaged)

    Explanation:

    The credit terms of 2/10, n/30 means that if Hannah Company pays within ten days, they will get a 2% discount, or they have thirty days to pay the full receipt.

    Hannah's check should be for:

    ($4,000 - $600) x 0.98% = $3,400 x 0.98% = $3,332

    Arter Company should record the following entries:

    Cr Accounts receivable $4,000

    Dr $3,332 Cash

    Dr $68 Sales discount

    Dr $600 returned merchandise (damaged)
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