Question: P18-3 (LO2,3,4) (Allocate Transaction Price, Discounts, Time Value) Grill Master Company sells total outdoor grilling solutions, providing gas and charcoal grills, accessories, and installation services for custom patio grilling stations.

Instructions

Respond to the requirements related to the following independent revenue arrangements for Grill Master products and services.

Grill Master sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for \(1,000 (cost \)550) on credit with terms 3/30, net/90. Prepare the journal entries for the sale of 20 grills on September 1, 2017, and upon payment, assuming the customer paid on (1) September 25, 2017, and (2) October 15, 2017. Assume the company records sales net.

Step by step solution

01

Definition of Sales Discount

The discount offered by the business entity at the time of selling goods that reduce the goods’ price is known as a sales discount. It is considered as the expense for the company.

02

Journal entries

Date	Accounts and Explanation	Debit $	Credit $
(1)
1 Sep 2017	Accounts receivables	$19,400
	Sales revenue		$19,400
1 Sep 2017	Cost of goods sold	$11,000
	Inventory		$11,000
25 Sep 2017	Cash	$19,400
	Accounts receivables		$19,400
(2)
1 Sep 2017	Accounts receivables	$19,400
	Sales revenue		$19,400
1 Sep 2017	Cost of goods sold	$11,000
	Inventory		$11,000
15 Oct 2017	Cash	$20,000
	Accounts receivables		$19,400
	Cash discount forfeited		$600

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