What is the correct journal entry to record the receipt of payment within the discount period on a sale of $2300 with terms of 2/8?
The correct entry for the receipt of payment within the discount period for a sale of $2300 with terms of 2/8 is to debit Cash for $2254 and Accounts Receivable for $2300, while debiting Sales Discounts for $46, making choice (c) closest to correct, but incomplete.
Explanation:
When a company receives payment within the discount period on a sale, the entry to record this transaction would typically involve debiting Cash for the amount received after applying the discount and crediting Accounts Receivable for the full invoice amount.
However, for the sale of $2300 with terms of 2/8, the correct entry takes into account the 2% discount.
The correct journal entry should be:
Debit Cash for the discounted amount: $2300 - 2% of $2300.
Credit Accounts Receivable for the full amount of $2300.
Therefore, the correct choice is (c) Debit Cash $2300, Credit Accounts Receivable $2300, except Cash should actually be debited for the discounted amount which is $2300 less 2% ($46), so Cash should be debited $2254. The difference of $46 (the discount amount) is then debited to the Sales Discounts account to account for the discount given.