BetterBuy sells $50,000 of TVs to a customer.The credit terms state a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.The customer pays in 12 days.How would BetterBuy record the customer's payment?
A) Debit Cash for $50,000 and credit Accounts Receivable for $50,000
B) Debit Accounts Receivable for $50,000, credit Cash for $49,500, and credit Inventory for $500
C) Debit Cash for $49,500, credit Accounts Receivable for $50,000, and debit Sales Discounts for $500
D) Debit Cash for $49,500, credit Accounts Receivable for $49,000, and credit Sales Returns & Allowances for $500

Question

Quizplus · Accepted Answer

The customer paid within the discount period of 8-14 days, so BetterBuy should record the sales revenue at the discounted amount of $49,500 ($50,000 - $500). To record the payment, BetterBuy would debit Cash for $49,500, credit Accounts Receivable for the full amount of $50,000, and debit Sales Discounts for $500 (the amount of the discount taken by the customer).

BetterBuy Sells $50,000 of TVs to a Customer