Credit terms are the terms of payment offered by the seller to the buyer. 2/10, n/30 refers to the sales discount given to the buyer by the seller in case of prompt payment. 2/10, n/30 means the following: “2” is the discount percentage offered to the purchaser by the seller. “10” refers to the number of days available for the buyer to pay and take advantage of the discount. “n/30” indicates that if the payment is not made by the buyer within 30 days, then he might not be eligible for the sales discount. Hence, payment will be due for the net amount at the end of the current month . To Discuss: Whether Mr. S behaved in a professional manner by subtracting the discount even though the discount period had expired.

Question

Oswego Clay Pipe Company sold $45,100 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60, Oswego uses the gross method of accounting for sales discounts. What entry would Oswego make on April 23, assuming the customer made the correct payment on that date? Multiple Choice Cash 44, 649 Sales discounts 451 Accounts receivable 45, 100 Cash 44, 649 Sales 451 45, 100 Accounts receivable

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Chapter 5, Problem 5.2TIF

To determine

Credit terms are the terms of payment offered by the seller to the buyer.

2/10, n/30 refers to the sales discount given to the buyer by the seller in case of prompt payment. 2/10, n/30 means the following:

“2” is the discount percentage offered to the purchaser by the seller.

“10” refers to the number of days available for the buyer to pay and take advantage of the discount.

“n/30” indicates that if the payment is not made by the buyer within 30 days, then he might not be eligible for the sales discount. Hence, payment will be due for the net amount at the end of the current month.

To Discuss: Whether Mr. S behaved in a professional manner by subtracting the discount even though the discount period had expired.

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