Question

On April 1, Snell Company made a $50,000 sale giving the customer terms of 3/10, n/30. The receivable was collected from the customer on April 8. How does the collection of cash from the customer affect the company's financial statements? Assets = Liab. + Stk. Equity Rev. - Exp. = Net Inc. Stmt of Cash Flows A. (1,500) = NA + (1,500) (1,500) - NA = (1,500) 48,500 OA B. (1,500) = NA + (1,500) (1,500) - NA = (1,500) NA C. (1,500) = NA + (1,500) NA - (1,500) = 500 1,500 OA D. 48,500 = NA + 48,500 48,500 - NA = 48,500 48,500 OA

Answer 1

Answer:

A.(1,500) = NA + (1,500) (1,500) - NA = (1,500) 48,500 OA

Explanation:

Cash discount=$50,000*3%=1,500

Cash from Customer=$50,000-$1,500=$48,500

Collection from customer will be reflected in current assets as whole part of total assets.

Therefore because of cash discount net assets will be reduced by $1,500 as it will no longer be received. Where as Cash of$48,500 will increase net assets.