Jupiter Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2017. The goods have a sales price of \(610,000 (cost of \)500,000). The terms are net 30. If Danone pays within 5 days, however, it receives a cash discount of $10,000. Past history indicates that the cash discount will be taken. On January 28, 2017, Danone makes payment to Jupiter for the full sales price.

Instructions

(a) Prepare the journal entry(ies) to record the sale and related cost of goods sold for Jupiter Company on January 2, 2017, and the payment on January 28, 2017. Assume that Jupiter Company records the January 2, 2017, transaction using the net method.

(b) Prepare the journal entry(ies) to record the sale and related cost of goods sold for Jupiter Company on January 2, 2017, and the payment on January 28, 2017. Assume that Jupiter Company records the January 2, 2017, transaction using the gross method.

Step by step solution

01

Cash Discount

A cash discount is referred to the offer by a seller to a buyer in exchange of paying a bill before the due datewith cash. Cash discount helps to increase the sales volume.

02

Journal entries

(a)

Date	Particular	Debit ($)	Credit ($)
January 2, 2017	Notes receivables a/c	600,000
	To Sales revenue a/c		600,000
January 2, 2017	Cost of goods sold a/c	500,000
	To Inventory		500,000
January 28, 2017	Cash a/c	610,000
	To Notes receivables a/c		600,000
	To Sales, discounts forfeited a/c		10,000

(b)

Date	Particular	Debit ($)	Credit ($)
January 2, 2017	Notes receivable a/c	610,000
	Sales revenue a/c		610,000
January 2, 2017	Cost of goods sold a/c	500,000
	Inventory a/c		500,000
January 28, 2017	Cash a/c	610,000
	Notes receivables a/c		610,000

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!