On April 1,Snell Company made a $50,000 sale giving the customer terms of 3/10,n/30.The receivable was collected from the customer on April 8.How does the collection of cash from the customer affect the company's financial statements?

Question

Quizplus · Accepted Answer

Sales discount = $50,000 × 3% = $1,500
Snell Company would collect $48,500 (or $50,000 ? $1,500) from the customer. Assets (cash) would increase by $48,500, assets (accounts receivable) would decrease by $50,000 (or a decrease of $1,500 for the discount plus a decrease of $48,500 for the remaining balance collected), and sales revenue would decrease by $1,500, which would decrease net income and stockholders' equity (retained earnings). The company would report a $48,500 cash inflow from operating activities.

On April 1,Snell Company Made a $50,000 Sale Giving the Customer