Question

On March 12, Medical Waste Services provides services on account to Grace Hospital for $10,900, terms 3/10, n/30. Grace pays for those services on March 20.
For Medical Waste Services, record the service on account on March 12 and the collection of cash on March 20.
Record service revenue on account
date general journl Debit credit
March 12
Record cash revenue on account
date general journl Debit credit
March 20

Answer 1

Answer:

March 12

Accounts Receivable                    10900 Dr

         Service Revenue                       10900 Cr

March 20

Cash                                          10573 Dr

Service discount                      327 Dr

      Accounts Receivable                     10900 Cr

Explanation:

March 12

The provision of services on account is recorded by a debit ot the asset account in form of accounts receivable and a credit to the service revenue. The full amount/ gross amount of service revenue is recorded as we assume that we use the gross method to record the service revenue.

March 20

The terms of credit which are 3/10 means that a 3% discount is allowed by Medical Waste Services if the Grace Hospital pays within the 10 days of the service provided on account. As the Grace Hospital pays within this period, a service discount of 10900 * 0.03 = 327 is allowed.

The remaining cash to be collected is 10900- 327 = 10573