Answer:
b. $588
Explanation:
Terms 2/10, n/30 means that 2% discount for the payment within 10 days and the full amount to be paid within 30 days.
When Larson Company sold merchandise, the following entry was made to recording revenue (sales) and the receivable:
Debit Receivable Account $1,000
Credit Revenue $1,000
On July 20 Stuart Co. returns merchandise, the entry is made to record the decreasing of Receivable Account:
Debit Revenue $400
Credit Receivable Account $400
The balance Receivable Account of Stuart Co. = $1000-$400 = $600
On July 24, Stuart Co. makes the payment, the sales discount was:
$600 x 2% = $12
The amount of cash received = $600-$12=$588
The following entry is made:
Debit Cash: $588
Debit Sales discount: $12
Credit Receivable Account $600
