3 of 3Required:In an effort to increase sales during the upcoming year, Lynbrookimplemented...3 of...

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Accounting

3 of 3
Required:
In an effort to increase sales during the upcoming year, Lynbrookimplemented a new credit policy of offering terms of 3/15, n/30.Your CFO is trying to decide between the NET method of recordingreceivables and the GROSS method, so she asked you to prepareentries using both methods.
Information:
On January 15, 2019, Lynbrook billed Scan House, Inc. $25,000 forconsulting services provided during the first week ofJanuary.
Required:
Net Method entries
1. Prepare the journal entry to record the sale using the netmethod.
2. Prepare the journal entry assuming the payment is received onJanuary 25, 2019.
3. Prepare the journal entry assuming the payment is not receiveduntil February 14, 2019.
Gross Method entries
4. Prepare the journal entry to record the sale using the grossmethod.
5. Prepare the journal entry assuming the payment is received onJanuary 25, 2019.
6. Prepare the journal entry assuming the payment is not receiveduntil February 14, 2019.

Answer & Explanation Solved by verified expert

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All working forms part of the answer
The journal entries under BOTH the methods are done side by side for comparison and better understanding:

	WHEN NET METHOD IS USED			WHEN GROSS METHOD IS USED
Date	Accounts title	Debit	Credit	Accounts title	Debit	Credit
15-Jan-19	Accounts receivables	$ 24,250.00		Accounts receivables	$ 25,000.00
	Service Revenue		$ 24,250.00	Service Revenue		$ 25,000.00
	(Services provided at 3% discount)			(Services provided on account)

25-Jan-19	Cash	$ 24,250.00		Cash	$ 24,250.00
	Accounts receivables		$ 24,250.00	Service Discount & Allowances	$ 750.00
	(Cash received within discount period)			Accounts receivables		$ 25,000.00
				(Cash received within discount period)

14-Feb-19	Cash	$ 25,000.00		Cash	$ 25,000.00
	Sales revenue		$ 750.00	Accounts receivables		$ 25,000.00
	Accounts receivables		$ 24,250.00	(Cash received after discount period)
	(Cash received after discount period)

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Transcribed Image Text

In: Accounting3 of 3Required:In an effort to increase sales during the upcoming year, Lynbrookimplemented...3 of 3Required:In an effort to increase sales during the upcoming year, Lynbrookimplemented a new credit policy of offering terms of 3/15, n/30.Your CFO is trying to decide between the NET method of recordingreceivables and the GROSS method, so she asked you to prepareentries using both methods.Information:On January 15, 2019, Lynbrook billed Scan House, Inc. $25,000 forconsulting services provided during the first week ofJanuary.Required:Net Method entries1. Prepare the journal entry to record the sale using the netmethod.2. Prepare the journal entry assuming the payment is received onJanuary 25, 2019.3. Prepare the journal entry assuming the payment is not receiveduntil February 14, 2019.Gross Method entries4. Prepare the journal entry to record the sale using the grossmethod.5. Prepare the journal entry assuming the payment is received onJanuary 25, 2019.6. Prepare the journal entry assuming the payment is not receiveduntil February 14, 2019.