Cupcake Corp.has sold goods at terms 2/10, n/30.If the discount is not taken, the amount payable is $8,725.Assuming Cupcake has used the net method, and payment was received within the discount period, the entry to record the payment would include

Question

Quizplus · Accepted Answer

If the customer takes the discount, they will only pay 98% of the total amount. Therefore, if the amount payable is $8,725, the original invoice was for $8,891.84 ($8,725 ÷ 0.98).

Since Cupcake has used the net method, the original sale was recorded at the full amount of $8,891.84, and the discount was not recorded until it was taken.

If the customer pays within the discount period, Cupcake would credit the Accounts Receivable account for the full amount of the invoice ($8,891.84) and then debit the Cash account for the discounted amount ($8,550.50).

Therefore, the entry to record the payment would include a credit of $8,550.50 to Accounts Receivable (choice B is correct). A debit to Cash for $8,550.50 would be needed, but this is not an option in the answer choices.

Option A is incorrect because there is no additional amount to be debited to Accounts Receivable.

Option C is incorrect because a credit to Sales would not be necessary in this situation.

Option D is incorrect because there is no account called "Forfeited Sales Discounts," and there is no need to record such an account in this transaction.