Sapawe Inc. offers customers a 2 percent discount if they pay their invoices within 10 days. On December 31, 2017, Sapawe reported accounts receivable of $275,000 (before adjusting for discounts), of which $120,000 is still eligible for the discount. Management estimates that 30 percent of the amount will be paid within the discount period. For the year ended December 31, 2017, Sapawe reported sales of $1,965,000 (before adjusting for discounts).

a. What journal entry should Sapawe record on December 31, 2017 to account for 2018 estimated discounts?
b. What amounts would be reported for accounts receivable and sales after the entry is made?
c. What entry would be recorded if on January 7, 2018 a cheque for $980 was received in payment of a $1,000 invoice within the discount period?

  • CreatedFebruary 26, 2015
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