Secret Trails received payment in full within the credit period for horse boarding for $900 plus 6% sales tax. terms of the sale were 2/10, n/30. which entry is required to record this payment?
a. Debit Cash, $900; credit accounts receivable sales $900
b. Debit cash, $936; debit sales discount $18; credit accounts receivable $954
c. Debit cash, $954; credit sales $954
d. Debit cash, $936; credit sales $936
I said B but not sure.
To determine the correct entry to record the payment, you need to understand the terms of the sale and the components involved.
The terms of the sale are stated as "2/10, n/30." This means that the buyer (Secret Trails) is eligible for a discount of 2% if payment is made within 10 days, and the full payment is due within 30 days.
The total amount of the payment is $900 plus 6% sales tax. Let's calculate each component separately:
Sales Tax: $900 * 6% = $54
Total Payment: $900 + $54 = $954
Now, let's consider the options.
Option A: Debit Cash, $900; Credit Accounts Receivable Sales, $900
This option does not take into account the sales tax and does not include any discount. Therefore, it is not the correct entry.
Option B: Debit Cash, $936; Debit Sales Discount, $18; Credit Accounts Receivable, $954
This option reflects the total payment of $954, including the sales tax. It also includes a debit to the Sales Discount account, indicating that Secret Trails took advantage of the 2% discount. This entry correctly reflects the terms of the sale, so option B is the correct choice.
Option C: Debit Cash, $954; Credit Sales, $954
This option only records the total payment without accounting for the sales tax or discount. Therefore, it is not the correct entry.
Option D: Debit Cash, $936; Credit Sales, $936
This option only records the amount without considering the sales tax or discount. Therefore, it is not the correct entry.
In conclusion, the correct entry to record this payment is option B: Debit Cash, $936; Debit Sales Discount, $18; Credit Accounts Receivable, $954.