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Hi, I need some help with this question

Forums › FIA Forums › FA1 Recording Financial Transactions Forums › Hi, I need some help with this question

  • This topic has 3 replies, 4 voices, and was last updated 9 years ago by talex10.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • December 1, 2015 at 9:55 am #286673
    eafsar
    Member
    • Topics: 2
    • Replies: 1
    • ☆

    Q. Jasmine buys goods from Reshma on 60-day credit limit terms. Alternatively, a 10% cash discount is available on any payment received within 10 days.

    During February the following transaction took place:
    Feb 2 Jasmine buys $800 of goods
    Feb 11 Jasmine pays Reshma a cheque of $360

    What is the balance of Jasmine’s account in Reshma’s receivable ledger at 28 February?

    A) $400
    B) $485
    C) $360
    D) $440

    December 1, 2015 at 1:06 pm #286709
    bilalkazimi
    Member
    • Topics: 2
    • Replies: 6
    • ☆

    Answer is D
    because its paid by cheque and not by cash so no discount will be applied .
    Hope t helped

    December 1, 2015 at 4:15 pm #286755
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10594
    • ☆☆☆☆☆

    A cash discount is given for prompt payment. It is nothing to do with cash/cheque.

    The payment on 11/2 of $360 will be after the 10% discount has been given, so is settling an original debt of 360/0.9 = $400. Therefore the amount owing hasbeen reduced by $400: $360 paid and 400 x 10% = 40 discount, ie ‘let off’, for prompt payment.

    The amount outstanding is therefore $800 – $400 = $400.

    December 2, 2015 at 2:28 pm #286988
    talex10
    Member
    • Topics: 2
    • Replies: 1
    • ☆

    Answer: C
    Soln:
    The total purchases $800 minus discount of 10% minus cheque amount $360 equal $360.
    The payment was within the 10 days limit which enable Jasmine to gain discount of $80 for paying on the 9 day of the discount days, i.e Feb 2-11.

    Note: Cash payment does not refer to using cash to make payment only. It is the idea of paying for goods and services at the point of transaction.

    Cash discount is not always given for prompt payment and can be given any time within the credit limit. e.g 5% cash discount for payment made within 15 days of purchase.

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