Stockton Company sold goods on account with a sales price of $70,000 on August 17. The terms of the sale were 2/10, n/30.

Instructions:
1. Record the sale using the gross method of accounting for cash discounts.
2. Record the sale using the net method of accounting for cash discounts.
3. Assume that the payment is received on August 25. Record receipt of the payment using both the gross method and the net method.
4. Assume that payment is received on September 15. Record receipt of the payment using both the gross method and the net method. Is the account used for the net method an asset, liability, revenue, or expense?
5. Which method makes more theoretical sense—the gross method or the net method? Why? Why don’t more firms use the net method?