Question

Barton Health Services provided care to a patient worth $1,200. Because the patient was over the age of 65, Barton granted the patient a 20% discount and the customer paid the correct amount in cash. How would Barton record the service transaction?
A. Cash 960
Service Revenue 960
B. Cash 960
Trade Discount 240
Service Revenue 1,200
C. Cash 1,200
Service Revenue 1,200
D. Cash 1,200
Trade Discount 240
Service Revenue 960

Answer 1

Answer:

B. Cash 960

Trade Discount 240

Service Revenue 1,200

Explanation:

The customer will pay the discounted amount so:

1,200 - 20% = 1,200 - 240 = 960 cash proceeds

Then, the company will record the discount as this is a business policy. The reason the discount is given was because the patient has over 65 years-old

Finally the service revenue will be in the full amount. Later on the income statement, the discount and allowance will give us the net sales.