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    Pam Johnson's Avatar
    Pam Johnson Posts: 1, Reputation: 1
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    #1

    Jun 18, 2012, 03:02 PM
    calculate accounts receivable interest revenue
    On October 5, Hawthorne sold merchandise for $20,000 with terms 2/10, n/30. On October 14, the customer sent a check for $13,720 taking advantage of the discount to settle $14,000 of the amount. On November 4, the customer paid the remaining $6,000.

    Net Method

    Accounts receivable 19,600
    Sales revenue 19,600

    Cash 13,720
    Accounts receivable 13,720

    Cash 6,000
    Accounts receivable 5,880 (19,600-13,720 = 5,880)
    Interest revenue 120 (? )

    How do I calculate the interest revenue?

    Pam Johnson
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 173
    Ultra Member
    		  
    #2

    Jun 18, 2012, 03:32 PM
    Quote Originally Posted by Pam Johnson View Post
    On October 5, Hawthorne sold merchandise for $20,000 with terms 2/10, n/30. On October 14, the customer sent a check for $13,720 taking advantage of the discount to settle $14,000 of the amount. On November 4, the customer paid the remaining $6,000.

    Net Method

    Accounts receivable 19,600
    Sales revenue 19,600

    Cash 13,720
    Accounts receivable 13,720

    Cash 6,000
    Accounts receivable 5,880 (19,600-13,720 = 5,880)
    Interest revenue 120 (??)

    How do I calculate the interest revenue?

    Pam Johnson
    Seems to me you have it a little backwards Pam

    A/R Dr 20000 sales Cr 20000
    A/R Cr 14000 Cash Dr 13720 settlement discounts Dr 280
    A/R Cr 6000 Cash Dr 6000

    There is no Interest Revenue since the customer settled the whole account within terms and you do not record the discounts before they are taken
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