Question

On December 28, 2021, Tristar Communications sold 14 units of its new satellite uplink system to various customers for $40,000 each. The terms of each sale were 1/20, n/30. Tristar uses the gross method to account for sales discounts. In what year will income before tax be affected by discounts, assuming that all customers paid the net-of-discount amount on January 6, 2022

Answer 1

Answer and Explanation:

The computation of the income before tax in the year 2022 would be reduced or decreased by the cash discount amount i.e. shown below:

= Sale value × discount rate × number of units sold

= $40,000 × 1% ×  14 units

= $5,600

Hence, the amount is $5,600

We simply applied the above formula so that the correct value could come

And, the same is to be considered