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James Bakery sells cupcakes to William's Restaurant. The credit terms are 1%/5/net 15. The selling price is $1.50 per cupcake. The cost per cupcake is $1.00. James' uses a perpetual inventory system. James' most recent sale is for 500 cupcakes. What amounts are entered into each account to record the transaction in which the account is paid within the discount period?

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Answer:

You didn´t attached the records demanded by the exercise, so I try to figure it out which were useful for the purpose. Any question, please ask.

Explanation:

  • Revenue = Number of unit sold x selling price per unit

= 500 x 1.5

= 750

  • Discount = Revenue x Discount percentage

= 750 x 1%

= 7.5

  • Cash = Revenue - Discount

= 750 - 7.5

= 742.5

  • Cost of goods sold = Number of unit sold x cost price per unit

= 500 x 1

= 500