On December 1, 2013, Lynch Incorporated sold $9,000 of merchandise with terms 2/10, n/EOM. On December 11,
Question:
On December 1, 2013, Lynch Incorporated sold $9,000 of merchandise with terms 2/10, n/EOM. On December 11, 2013, collections were made on sales originally billed for $5,000, and on December 31, 2013, additional collections on sales originally billed for $3,000 were received.
Required:
1. Prepare the journal entries to record the sale, collections, and any required year-end adjustments under (a) the gross price method and (b) the net price method.
2. Next Level Assume that Lynch's customer does not have the available cash to pay Lynch within the discount period. How much interest should the customer be willing to pay for a loan to permit them to take advantage of the discount period (assume no additional costs to the loan)?
3. Next Level Explain why Lynch's granting of cash (sales) discounts may improve cash flow.
Step by Step Answer:
Intermediate Accounting Reporting and Analysis
ISBN: 978-1111822361
1st edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach