Pharoah Co. uses the gross method to record sales made on credit. On June 1, 2017, it made sales of $50,400 with terms 3/15, n/45. On June 12, 2017, Pharoah received full payment for the June 1 sale. Prepare the required journal entries for Pharoah Co.

Journal entries for Pharoah Co.

On June 1, 2017, when it made the Sale, the Journal entries are as follows:

Trade Receivables $ 50,400 (debit)

Revenue $ 50,400 (credit)

Being Recognition of Sale

On June 12, 2017, when Pharoah Co, received full payment for the June 1 sale

Discount Allowed $ 1,512 (debit)

Trade Receivables $ 1,512 (credit)

Being Discount Allowed Recognised with Payment

Cash $ 48,888 (debit)

Trade Receivables $ 48,888 (credit)

Being Discount Allowed Recognised with Payment

Explanation:

journal entries for Pharoah Co.

Pharoah Co. offers a 3% cash discount when the full payment is received within 15 days, 45 days being the settlement days for all sells on Account according to their terms of 3/15, n/45

On June 1, 2017, when it made the Sale, the Journal entries are as follows:

Trade Receivables $ 50,400 (debit)

Revenue $ 50,400 (credit)

On June 12, 2017, when Pharoah Co, received full payment for the June 1 sale

Payment falls within the 15 days in which Pharaoh gives a cash discount. Thus the payment qualifies for a cash discount.

Discount Allowed $ 1,512 (debit)

Trade Receivables $ 1,512 (credit)

Being Discount Allowed Recognised with Payment

Cash $ 48,888 (debit)

Trade Receivables $ 48,888 (credit)

Being Discount Allowed Recognised with Payment