Cash Discounts
Response to the following problem:
The Lambert Corporation sells merchandise at a list price of $70,000 with accompanying terms of 2/10, n/30 on December 8, 2010. By December 18, 2010, Lambert had collected from customers for merchandise originally billed at $46,000. By December 31, 2010, additional collections had been received on sales originally billed for $18,000, and sales returns and allowances of $1,500 had been granted by Lambert. By January 15, 2011, all the remaining balances due had been collected.
Required:
1. Prepare the journal entries using (a) the gross price method and (b) the net price method to record each of the following items:
a. The sale of the merchandise
b. Collections received by December 18, 2010
c. Collections received by December 31, 2010
d. Sales returns and allowances (not estimated in the period of sale)
e. Any required year-end adjustments
f. Any January 1, 2011 reversing entries
g. The collections received by January 15, 2011
2. Calculate the accounts receivable balance that would be reported under (a) the gross price method and (b) the net price method on Lambert Corporation's December 31, 2010, balance sheet.