Question

on may 3, bare bones company sold dog beds that cost $1,400 to its customer for $2,000, with credit terms of 2/10, n30. on may 13, the customer paid the full amount due. which is part of the journal entry to record the payment, assuming the perpetual inventory system.
a debit to cash for $1,960; credit to accounts receivable for $1,960.
b debit to cost of goods sold for $1,400; credit to accounts receivable for $1,400.
c debit to accounts receivable for $1,960; credit to cash for $1,960.
d debit to cash for $2,000; credit to accounts receivable for $2,000.

Explanation:

• Credit terms of 2/10, n/30 mean a 2% discount if paid within 10 days, otherwise full amount in 30 days.
• The customer paid on May 13 (more than 10 days after May 3), so no discount is taken.
• Cash received is the full amount of $2,000.
• Accounts Receivable is credited (reduced) by the full amount owed of $2,000.

Answer:

D. Debit to Cash for $2,000; credit to Accounts Receivable for $2,000.