P5-56A. (Learning Objectives 1, 3: Apply GAAP for proper revenue recognition; account
for sales discounts) Preston Industrial Supply offers terms of 2/10, n/30 to its wholesale
customers. Preston's cost of goods sold is 25% of sales. The company had the following
transactions during October:
LO 1,3
October 1 Sold \$6,000 of merchandise to Penzey Co. on account.
October 3 Sold \$2,000 of merchandise to Brownlee Corporation, who paid by credit card.
The credit card company charges Preston a fee of 2% on credit card sales.
October 7 Sold \$23,000 of merchandise to Marigold Company on account.
October 8 Penzey paid the balance of what it owed for the purchase on October 1.
October 12 Sold \$13,000 of merchandise to Wolf Enterprises on account.
October 16 Marigold paid the balance of what it owed for the purchase on October 7.
October 31 Wolf paid the balance of what it owed for the purchase on October 12.
Requirements
1. Record Preston's transactions, including the cost of goods sold entry for each sale.
2. Calculate the net sales revenue for the month.
