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a firm which sells exclusively on credit allows a discount of 2% to its customers they pay by the due date, which they always do.
information given:
amount owed by debtors at the beginning of the year: $22,000
amount owed by debtors at the end of the year $24,000
bad debt written off during the year $ 3,500
money received from debtors during the year $147,000.the firm’s credit sales for the year were:?
my solution is :
24,000+3,500+147,000-22,000?152,500
152,500*2%:),050
152500+3050?155?550am i right? its not same as the given answer, but i don’t know where is wrong.
somebody can explain for me?
thank you!
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Hi Jane,
You’re very close, but missing one piece of the puzzle–use a little more algebra.
Let x = credit sales
Lex 0.02x = discounts allowed ( the 2% the customers always take)Now, make a T account: On the debit side, you need to insert (dropping zeros):
Opening balance: 22
Sales: xOn the credit side, you need to enter usual credit items, using 0.02x for D.A.:
Cash 147
Bad debts written off 3.5
Discounts allowed 0.02x
Closing balance 24Finally, use algebra to solve for x–the debits must equal the credits (as you know):
22 + x = 147 + 3.5 + 0.02x + 24
simplifies to:
0.98x = 147 + 3.5 +24 – 22
etc…
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