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3 April, 07:59

Nash's Trading Post, LLC sells merchandise on account for $1200 to Morton Company with credit terms of 2/7, n/30. Morton Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Nash's Trading Post, LLC make upon receipt of the check?

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  1. 3 April, 08:46
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    The answer is: Nash's Trading Post should record the following entries

    Cr Accounts receivable $1,200 Dr $686 Cash Dr $14 Sales discount Dr $500 returned merchandise (damaged)

    Explanation:

    The credit terms of 2/7, n/30 means that if Morton Company pays within seven days, they will get a 2% discount, or they have thirty days to pay the full receipt.

    Morton's check should be for

    ($1,200 - $500) x 0.98% = $700 x 0.98% = $686

    Nash's Trading Post should record the following entries

    Cr Accounts receivable $1,200

    Dr $686 Cash

    Dr $14 Sales discount

    Dr $500 returned merchandise (damaged)
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