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Harwell Company manufactures automobile tires. On July 15, 2018, the company sold 1,300 tires to the Nixon Car Company for $50 each. The terms of the sale were 3/10, n/30. Harwell uses the gross method of accounting for cash discounts. Required: 1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on July 23, 2018. 2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on August 15, 2018

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Answer and Explanation:

The Journal entry is shown below:-

1. a. Accounts Receivable Dr, $65,000 (1,300 × $50)

            To Sales revenue $65,000

(Being sales revenue is recorded)

b. Cash  Dr, $63,050

    Sales discount Dr, $1,950 ($65,000 × 3%)

              To Accounts Receivable $65,000

(Being collection  is recorded)

2. a. Accounts Receivable Dr, $65,000

              To Sales revenue $65,000

(Being sales revenue is recorded)

Cash Dr, $65,000

            To Accounts Receivable $65,000

(Being collection is recorded)

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