Bruno's Fashions bought 60 nose-rings for $20 each on account. The invoice included $54 GST and payment terms of 2/10, n/30. Ten nose-rings were returned prior to payment. The entry to record the payment (within the discount period) would include

Question

Quizplus · Accepted Answer

The total amount of the invoice (including GST) is $1,254 ($20 x 60 = $1,200 + $54 GST). If 10 nose-rings were returned, the total amount owing is now $1,054 ($1,254 - $20 x 10). 
The payment terms allow for a discount of 2% if paid within 10 days (2/10, n/30), which means the discount would be $21.08 ($1,054 x 0.02).
Therefore, the entry to record the payment would be:
Debit Accounts Payable $1,054
Debit GST Payable $54
Credit Cash $1,030 ($1,054 - $21.08 discount)

Bruno's Fashions Bought 60 Nose-Rings for $20 Each on Account