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A seller using the GROSS method sells 50 items on account for $15 each, terms 2/10 net 30, expecting payment after the discount period. At what amount is the sale recorded?
ADebit Accounts Receivable $735; credit Sales $750
BDebit Accounts Receivable $735; credit Sales $735
CDebit Accounts Receivable $750; credit Sales $735
DDebit Accounts Receivable $750; credit Sales $750
Answer & Solution
Correct answer: D. Debit Accounts Receivable $750; credit Sales $750
1. Selling price = 50 x $15 = $750.
2. Under the gross method the sale is recorded at the full amount because the seller expects payment after the discount period.
3. So both Accounts Receivable and Sales are recorded at $750.
4. The discounted $735 figure belongs to the net method, not the gross method.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.3.2 "Discounts - The Seller", p.98_
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