Question

AG Inc. made a $85,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as an account receivable on the date of sale?

Answer 1

Answer:

$84,150

Explanation:

Given that

Sale amount = $85,000

Terms = 1% discount is given it payment is made within 15 days and the total credit period allowed is 30 days

The computation of the amount of account receivable that should be recorded is shown below:      

= Sale amount - sale amount  × discount rate given

= $85,000 - $85,000 × 1%

= $85,000 - $850

= $84,150

Simply we deduct the discount period from the sales amount so that the accurate value could come