What entry would Harvey's make on April 23, assuming the customer made the correct payment on that date?

Option 1:
Account Title | Debit | Credit
Cash | 45,540 |
Sales | 460 |
Accounts receivable | | 46,000

Option 2:
Account Title | Debit | Credit
Cash | 46,000 |
Sales discounts | 460 |
Accounts receivable | | 46,000
Sales discounts forfeited | | 460

Option 3:
Account Title | Debit | Credit
Cash | 45,540 |
Sales discounts | 460 |
Accounts receivable | | 46,000

Option 4:
Account Title | Debit | Credit
Cash | 45,540 |
Accounts receivable | | 45,540

To determine the correct journal entry for Harvey's on April 23, we need to understand the given options and context. This scenario involves a sale, an accounts receivable, a cash receipt, and a possible sales discount.
Key Concepts:

Accounts Receivable : The amount due from customers for credit sales.
Cash : The actual cash received from the customer.
Sales Discounts : Reduction in sales price offered to customers for timely payment.

Given Options Explained:

Option 1 assumes a total cash receipt of $45,540, but incorrectly lists a sales element. There's no indication of what the remaining balance relates to, making this an unlikely choice.
Option 2 records $46,000 cash and a sales discount forfeited, suggesting the customer didn't take advantage of any discount. This scenario doesn't match the cash received.
Option 3 records cash received with a discount accounted for, matching a $460 sales discount. Debit in 'Sales Discounts' seems correct if a discount was indeed given.
Option 4 correctly matches the cash received of $45,540 to accounts receivable. However, it doesn't account for any sales discount, which is necessary if originally offered at $46,000 less discount.

Correct Choice:
Option 3 is the correct entry.
Explanation of Option 3:

Cash (Debit $45,540) : This is the amount received from the customer after the discount.
Sales Discounts (Debit $460) : Reflects the discount given to the customer for early payment.
Accounts Receivable (Credit $46,000) : Indicates the reduction of money owed by the customer. This was the original invoice amount before the discount.

Journal Entry:

Cash : $45,540
Sales Discounts : $460
Accounts Receivable : $46,000

This entry shows a clear representation that the customer took advantage of the sales discount offered for early payment, resulting in Harvey's recognizing the decrease in revenue via a sales discount and clearing the accounts receivable with the cash received.

Answered by OliviaLunaGracy | 2025-07-06