Question

On March 17, Jackal Lumber sold building materials to Fredo Limited for $15,000 with terms of 3/10, net 20. What amount did Jackal record as revenue on March 25 when Fredo paid for the building materials?
a. $15,000.

b. $14,550.

c. $15,450.

d. $0.

Answer 1

Answer:

Correct option is (b)

Explanation:

3/10, net 20 is a payment term used for goods sold on credit. This means a 3% discount is given on payment due by the customer if the payment is made within 10 days. Otherwise, full payment need to be made in 20 days.

Here, goods were sold on March 17 and payment was made within 10 days that is 25 March. So, Fredo is entitled to receive 3% discount.

Total amount due is $15,000

3% discount = 0.03 × 15,000 = 450

Remaining amount paid = 15,000 - 450 = $14,550.

So, Jackal recorded revenue of $14,550