Surplus Galore uses the gross method of accounting for sales discounts. Selected data from its records for the year ended December 31 was as follows: Assume that Austin Maxwell pays his $400 receivable on January 3, taking the 2 percent discount to which he is entitled. Journalize the entry to record the transaction.

Gross Method

An accounting method for recording purchases at the full invoice price without deducting any cash discounts offered.

Sales Discounts

Reductions in the sale price given by a seller to a buyer, often used as an incentive for early payment or bulk purchasing.

Receivable

Amounts of money owed to a company by its customers or other parties for goods or services provided.