Question

On July ​1,Foster Corp. made a sale of $445,000 to Willette​, Inc. on account. Terms of the sale were 3​/10, ​n/30. Willette makes payment on July 29.

Foster uses​ most-likely-amount method and assumes that the customer will take the discount when accounting for sales discounts.

Ignore cost of goods sold and the reduction of inventory.

What net sale does Foster report?

Answer 1

Sales = $445,000

Discount rate = 3%

Sales discount = Sales x Discount rate

= 445,000 x 3%

= $13,350

Net sales = Sales - Sales discount

= 445,000 - 13,350

= $431,650

3% discount is applicable only when the customer makes the payment within he discount period of 10 days i.e. upto July 11. Since payment was received from the customer on 29th July i.e. after the discount period, hence sales discount will be forfeited.

Net sales will be = Sales - Sales discount + Sales discount forfeited

= 445,000 - 13,350 + 13,350

= $445,000

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