A sales transaction of $5,000 provides the customer a cash discounts of 2/15, n/30. If the firm adopts the net method to account for the transaction initially and the customer did not take advantage of the discount within 15 days, the journal entry on the date of payment involves

A sales transaction of $5,000 provides the customer a cash discounts of 2/15, n/30. If the firm adopts the net method to account for the transaction initially and the customer did not take advantage of the discount within 15 days, the journal entry on the date of payment involves

Debit Accounts Receivable $100

Credit Sales Revenue $100

To reverse the cash discount.

Debit Cash $5,000

Credit Accounts Receivable $5,000

To record the receipt from customer on account.

Explanation:

The first journal entry involves the reversal of the discount.  The second set involves the receipt of cash from the customer.

The cash discount of $100 is calculated as 2% of $5,000.

correct, but each time you dont pay the price of the penalty can increase.