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16 October, 04:30

Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,000 and payment terms of 3/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

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  1. 16 October, 06:55
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    Alison should record the purchase at: $5,820.

    Explanation:

    By Alison using the net method to record purchases means that the company records purchases, less discount.

    The cash discount terms 3/10, n/30 mean 3% cash discount if the invoice amount is settled within 10 days; meanwhile, if it is settled within 30 days, the customer pays the full invoice amount.

    Using the net method = $6,000 - (3/100 x $6,000) = $5,820.
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