Question

Under the revenue treatment of recording discounts, which procedure is used to record the discount on an invoice for food purchases of $300 with a 2% discount? a. The discount is recorded to a Cash Discounts Earned account. b. The discount is recorded as a reduction of food cost. c. The discount is recorded as an increase to sales revenue. d. The discount is not recorded.

Alison's Resorts buys uniforms from McGuire Manufacturing. Alison purchased uniforms from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at: $5,940. $5,880. $6,000. $6,120.

Answer 1

AS PER QUESTION DEMANDED INVOICE OF FOOD PURCHASE

$300

DISCOUNT 2%

THIS TYPE OF DISCOUNT IS TREATED AS PER TRADE DISCOUNT AND TRADE DISCOUNT RECEIVED THE COST OF ITEM IS REDUCE

ANSWER IS B

THIS DISCOUNT IS RECORDED AS A REDUCTION OF FOOD COST

ANISON RESORT BUY UNIFORM FROM MCGUIR

DATE ON INVOICE 17 JULY

PAYMENT TERM

2/10,N/10

ANISON USED THE NET METHOD TO RECORD THIS PURCHASES

MOST RETAILERS BUT INVENTORY ON ACCOUNT ON CREDIT THESE RETAILERS CAN USALLY RECEIVE A DISCOUNT FOR PAYING IN CASH SINCE THE MANUFACTURERS AND WHOLESALERS DONT WANT TO HAVE OUTSTANDING ACCOUNT RECEIVABLE AN ADDITIONAL DISCOUNT 2% IS STANDARD CASH DISCOUNT PRICE USUALLY RETAILERS MUST PAY FOR THE INVENTORY IN CASH WITH IN FIRST 10 DAYS AFTER PURCHASES TO RECEIVE THE DISCOUNT OTHERWISE THE FULL - UNDISCOUNTED PURCHASES PRICE IS DUE IN 30 DAYS THIS INVOICE AGREEMENT IS USUALLY WRITTEN LIKE 2/10,N/30 OR 2/10,

NET /30 THERE ARE TWO WAYS TO ACCOUNT FOR CASH DISCOUNT THE GROSS MEHTOD AND THE NET MEHTOD THIS QUESTION ANISON RECORD PURCHASES NET MEHTOD NET MEHTOD ANSWER IS

$6000*98%= $5880

AND THE ANSWER IS THE QUESTION

$5880