(a) Sales discounts: The term 3 / 10 , n / 40 means that if a customer is paying in 10 days then the payment will be after a discount of 3 % on the total value but if the customer is paying in 40 days then the payment will be made in full which means no discount. Gross method: Under this method, the revenues are recorded at gross amount of sales i.e. without taking the effect of any discount at the time of sales. The journal entries for Spartan Inc. for recording the sales at gross.
(a) Sales discounts: The term 3 / 10 , n / 40 means that if a customer is paying in 10 days then the payment will be after a discount of 3 % on the total value but if the customer is paying in 40 days then the payment will be made in full which means no discount. Gross method: Under this method, the revenues are recorded at gross amount of sales i.e. without taking the effect of any discount at the time of sales. The journal entries for Spartan Inc. for recording the sales at gross.
Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.
Chapter 5, Problem 88BPSB
To determine
(a)
Sales discounts:
The term 3/10,n/40 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 40 days then the payment will be made in full which means no discount.
Gross method:
Under this method, the revenues are recorded at gross amount of sales i.e. without taking the effect of any discount at the time of sales.
The journal entries for Spartan Inc. for recording the sales at gross.
Expert Solution
Answer to Problem 88BPSB
The journal entries for sales transactions at gross amount are recoded properly.
Explanation of Solution
The Spartan Inc. provided two services. One at the amount of $2,50,000 and the other at the amount of $75,000 that is the list price. This is given in the question.
The journal entry for Spartan Inc. at the gross amount is as follows:
Date
Particulars
Debit ($)
Credit ($)
Accounts Receivable…………………… Sales…………………………………(Record the sales service (a) )Accounts Receivable…………………… Sales…………………………………(Record the sales service (b) )
2,50,00075,000
2,50,00075,000
To determine
(b)
Sales discounts:
The term 3/10,n/40 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 40 days then the payment will be made in full which means no discount.
Gross method:
Under this method, the revenues are recorded at gross amount of sales i.e. without taking the effect of any discount at the time of sales.
The journal entry for the receiving payment within 10 days.
Expert Solution
Answer to Problem 88BPSB
The adjusting entry for recording the payment receivable of sales is recorded properly.
Explanation of Solution
The Spartan Inc. provided two services. One at the amount of $2,50,000 and the other at the amount of $75,000 that is the list price. The discount offered is 3% which is claimed by the buyer on the $2,50,000 payment. This is given in the question.
The journal entry for Spartan Inc. is as follows:
Date
Particulars
Debit ($)
Credit ($)
Cash………………………………Sales discount……………………. Accounts Receivable………………(Record the receiving of revenue of service contact within the discount period of 10 days)
2,42,5007,500
2,50,000
Amount of service payment received is={2,50,000−(2,50,000×1%)}=2,42,500.
To determine
(c)
Sales discounts:
The term 3/10,n/40 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 40 days then the payment will be made in full which means no discount.
Gross method:
Under this method, the revenues are recorded at gross amount of sales i.e. without taking the effect of any discount at the time of sales.
The journal entry for the receiving payment after 10 days.
Expert Solution
Answer to Problem 88BPSB
The adjusting entry for recording the payment receivable of sales is recorded properly.
Explanation of Solution
The Spartan Inc. provided two services. One at the amount of $2,50,000 and the other at the amount of $75,000 that is the list price. The discount offered is 3% which is not claimed by the buyer on the $75,000 payment. This is given in the question.
The journal entry for Spartan Inc. is as follows:
Date
Particulars
Debit ($)
Credit ($)
Cash……………………………… Accounts Receivable………………(Record the receiving of revenue of service contact within the discount period of 10 days)
75,000
75,000
To determine
(d)
Sales discounts:
The term 3/10,n/40 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 40 days then the payment will be made in full which means no discount.
To calculate:
The implied annual interest rate which the Grieder has to incur after failing to take benefit of sale discount.
Expert Solution
Answer to Problem 88BPSB
The implied annual interest rate is 3.09% .
Explanation of Solution
The Grieder did not pay the amount of $75,000 within the period the sale discount i.e. paid after 40 days. Due to this, the Spartan Inc. has to bear some interest expense for which Spartan Inc. charges the Grieder to compensate such interest charges.
Interest Calculation=Discount provided for the payment within 10 daysAmount Paid=3%97%=3.09%.
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