Mittal Bros. purchased 100 shawls @ 3,000 per shawl. Allowed 10% Trade Discount
and 3% Cash Discount if payment is made within 14 days. Mittal Bros. received 10 shawls of poor quality, which it returned. Mittal Bros. settled the payment in 10 days.
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Answers
Answer:
Working note in the attachment. Journal entries in the attachment.
Explanation:
Price of 1 shawl = Rs. 3,000
Qty of shawls purchased = 100
Therefore, total price for 100 shawls = 100*3,000 = Rs. 3,00,000
Trade discount allowed is 10%. So, Amt. of TD = 10% of 3,00,000 = Rs. 30,000.
Subtracting Rs. 30,000 from Rs. 3,00,000, we get Rs. 2,70,000.
Since Trade discount is not recorded in journal entry, we record the amt. of sales as Rs. 2,70,000.
Since 10 shawls were returned, the amt. of sales return is 10*3,000 = Rs. 30,000.
So, pāss the journal entry for sales return.
The remaining balance of Mittal Bros. A/c and sales is Rs. 2,40,000 each.
Since the payment was made within time, Mittal Bros. avail cash discount of 3%.
Therefore, amt. of CD = 3*2,40,000/100 = 7,200.
Cash Discount, unlike trade discount is shown in journal. Therefore, pāss the journal entry as shown in the attachment.
AnsweR
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