Sales Recorded Both Gross and Net On June 3, Hunt
Sales Recorded Both Gross and Net On June 3, Hunt Company sold to Ann Mount merchandise having a sale 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.
(a) Prepare journal entries on Hunt Company books 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.