Question

Leno Company sells goods to the Fallon Company for​ $10,000. It offers credit terms of​ 2/10, n/30. If Fallon Company pays the invoice within the discount​ period, Leno Company will record a debit to Cash in the amount​ of: A. ​$10,200. B. ​$10,000. C.​$200. D. ​$9,800.

Answer 1

Answer:

Leno Company will record a debit to Cash in the amount​ of: D. ​$9,800

Explanation:

The terms of 2/10, n/30 means 2% discount for the payment within 10 days and the full amount to be paid within 30 days.

Fallon Company pays the invoice within the discount​ period - early enough to receive a 2% discount. The discount amount is 2% x $10,000 = $200.

On the other hand, Leno Company has to offer a 2% discount to Fallon Company. Cash amount Leno Company receives = $10,000 - 2% x $10,000 = $9,800

Leno Company will record a debit to Cash in the amount​ of $9,800