On June 3, Hunt Company sold to Ann Mount merchandisehaving a sales price of $8,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $120, termsn/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost. Uponreceipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flawsthat rendered it worthless. The same day, Hunt Company issued a credit memo covering the worthlessmerchandise and asked that it be returned at company expense. The freight on the returned merchandisewas $24, paid by Hunt Company on June 7. On June 12, the company received a check for the balance duefrom Mount.Instructions(a) Prepare journal entries for Hunt Company to record all the events noted above under each of thefollowing bases.(1) Sales and receivables are entered at gross selling price.(2) Sales and receivables are entered net of cash discounts.(b) Prepare the journal entry under basis (2), assuming that Ann Mount did not remit payment untilAugust 5.
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