Quick Question for all
Why in this solution they took only $100000 for calculation of discount, why not total amount collectible.
Question CPA-00058
Delta, Inc. sells to wholesalers on terms of 2/15, net 30. Delta has no cash sales but 50% of Delta's
customers take advantage of the discount. Delta uses the gross method of recording sales and trade
receivables. An analysis of Delta's trade receivables balances at December 31 revealed the following:
Age Amount Collectible
0-15days $100,000 100%
16-30days 60,000 95%
31-60days 5,000 90%
Over 60 days 2,500 $500
$167,500
In its December 31 balance sheet, what amount should Delta report for allowance for discounts?
A. $1,000
B. $1,620
C. $1,675
D. $2,000
Explanation
Choice “A” is correct, $1,000 allowance for discounts at 12/31.
Accounts receivable (015
days) 100,000
50% of customers take 2% discount x 1%
Allowance for discounts at 12/31 1,000
.