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7 November, 16:12

Leno Company sells goods to the Fallon Company for $10,000. It offers credit terms of 2/10, n/30. If Fallon Company pays the invoice within the discount period, Leno Company will record a debit to Cash in the amount of: A. $10,200. B. $10,000. C. $200. D. $9,800.

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  1. 7 November, 16:40
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    Leno Company will record a debit to Cash in the amount of: D. $9,800

    Explanation:

    The terms of 2/10, n/30 means 2% discount for the payment within 10 days and the full amount to be paid within 30 days.

    Fallon Company pays the invoice within the discount period - early enough to receive a 2% discount. The discount amount is 2% x $10,000 = $200.

    On the other hand, Leno Company has to offer a 2% discount to Fallon Company. Cash amount Leno Company receives = $10,000 - 2% x $10,000 = $9,800

    Leno Company will record a debit to Cash in the amount of $9,800
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