Yogurt and Jelly Financial Transactions - Payment Receipt

Yogurt and Jelly Company Transaction Overview

  • Company Details:

    • Yogurt and Jelly is an ice cream company.
    • Provides cleaning services to a customer.

  • Transaction Date:

    • October 15, 2023.

  • Transaction Amount:

    • Total charge for services: $900.

  • Payment Terms:

    • Terms of the sale: 2/10, n/60.
    • This means the customer receives a 2% discount if payment is made within 10 days.
    • The net amount is due in 60 days.

Payment Received

  • Date of Payment Receipt:
    • Payment is recorded on October 22, 2023 (7 days after the invoice).

Calculation of Payment Details

  • Eligibility for Discount:
    • Since payment is made after 10 days, the customer does not qualify for the discount.
  • Amount to be Recorded upon Receipt of Payment:
    • The full payment amount of $900 is recorded in cash.

Accounting Entries on Payment Receipt

  • Effects on Financial Statements:
    • Cash: Increases by $900 (amount received from the customer).
    • Accounts Receivable: Decreases by $900 (removal of the receivable as the amount is now paid).

Multiple Choice Analysis of Options

  • Given Options for Recording:

    1. Sales Discounts increases $90
    • Incorrect. No discount is applied as payment is made after the discount period.
    1. Accounts Receivable decreases $882
    • Incorrect. The decrease in Accounts Receivable should be by $900 not $882.
    1. Sales Discounts decreases $60
    • Incorrect. No sales discounts are applicable.
    1. Cash increases $900
    • Correct. The cash account increases by the full amount received.

Conclusion

  • On October 22, 2023, upon receiving the payment from the customer, the correct action is:
    • Cash increases $900.