Touch Tronix, Inc.sells component parts to Advanced Communications, Inc.a cell phone manufacturer.On December 10, 2011, Touch Tronix, Inc.sold €680,000 of goods to Advanced Communications, Inc.on account for €880,000.Terms of the sale were 2/10, net 30.On December 18, 2011, 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, 2011?

Question

Quizplus · Accepted Answer

The payment was made within the discount period, so a 2% discount applies. The discount is €17,600 (€880,000 x 2%). Therefore, the assets decrease by the discount amount of €17,600 when the payment is made.