On June 3, Hunt Company sold to Ann Mount merchandise
having a sales price of $8,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $120, terms
n/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost. Upon
receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flaws
that rendered it worthless. The same day, Hunt Company issued a credit memo covering the worthless
merchandise and asked that it be returned at company expense. The freight on the returned merchandise
was $24, paid by Hunt Company on June 7. On June 12, the company received a check for the balance due
from Mount.
Instructions
(a) Prepare journal entries for Hunt Company to record all the events noted above under each of the
following bases.
(1) Sales and receivables are entered at gross selling price.
(2) Sales and receivables are entered net of cash discounts.
(b) Prepare the journal entry under basis (2), assuming that Ann Mount did not remit payment until
August 5.
having a sales price of $8,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $120, terms
n/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost. Upon
receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flaws
that rendered it worthless. The same day, Hunt Company issued a credit memo covering the worthless
merchandise and asked that it be returned at company expense. The freight on the returned merchandise
was $24, paid by Hunt Company on June 7. On June 12, the company received a check for the balance due
from Mount.
Instructions
(a) Prepare journal entries for Hunt Company to record all the events noted above under each of the
following bases.
(1) Sales and receivables are entered at gross selling price.
(2) Sales and receivables are entered net of cash discounts.
(b) Prepare the journal entry under basis (2), assuming that Ann Mount did not remit payment until
August 5.