BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?
A)Debit Inventory for $500 and credit Accounts Payable for $500.
B)Debit Cash for $49,500,credit Accounts receivable for $50,000,and debit sales discounts for $500.
C)Debit Accounts receivable for $50,000,credit Cash for $49,500,and credit sales discounts for $500.
D)Debit Accounts Payable for $500 and credit Inventory for $500.
E)The discount would be $500 (.01*50,000).The customer would pay $49,500 in cash.The discount is debited to Sales Discount and Account Receivable is credited for $50,000 (the original amount of the sale).

Question

Quizplus · Accepted Answer

BetterBuy receives the payment within 8-14 days, qualifying for a 1% discount. The discount is $500 (1% of $50,000), so the cash received is $49,500. The entry debits Cash for $49,500, credits Accounts Receivable for $50,000, and debits Sales Discounts for $500.

BetterBuy Sells $50,000 of TVs to a Customer