Touch Tronix, Inc. sells component parts to Advanced Communications, Inc. a cell phone manufacturer. On December 10, 2014, Touch Tronix, Inc. sold €1,020,000 of goods to Advanced Communications, Inc. on account for €1,320,000. Terms of the sale were 2/10, net 30. On December 18, 2014, Advanced Communications, Inc. paid the account in full. Which of the following is true regarding the impact on the statement of financial position for Touch Tronix, Inc. when the payment is made on December 18, 2014?

Question

Quizplus · Accepted Answer

When the sale was made on December 10, 2014, an accounts receivable of €1,320,000 was recorded as an asset on the statement of financial position for Touch Tronix, Inc. When Advanced Communications, Inc. paid the account in full on December 18, 2014, the accounts receivable was decreased by the amount paid, which was €1,320,000 x 2% = €26,400. Therefore, the assets decreased by €26,400.