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Cloud buys goods with a list price of $50,000 from Moon. Cloud receives a trade discount of 12% from Moon on all its purchases and a further 4% discount if payment is made within 10 days. Sales tax is charged at 15%.
What figure should Cloud show in Moon’s personal account to record its purchase?Sir how will we do this
THe answer is 50336, but how?
Does your book not show the workings for their answer?
After the trade discount they would be charged (ignoring VAT) 50,000 – (12% x 50,000) = 44,000
The tax is charged after all discounts, and so would be 15% x (44,000 – (44,000 x 4%) = 6,336.The amount recorded in receivables would be ignoring the cash discount (because they would not know whether or not the payment would be made in time) and so would be 50,000 – (12% x 50,000) + 6,336 = 50,336.
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