Question

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 $5,900 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

a. $5,782.
b. $2,891.
c. $6,018.
d. $5,900.

Answer 1

Answer:

Purchases will be recorded at $5782 and option a is the correct answer.

Explanation:

The net method of recording purchases mean that the purchases are recorded at their net value and after deducting any cash discount that the terms state assuming that the payment will be made within the discount period. the terms 2/10 state a 2% discount on list price if payment is made within 10 days of purchases..

Discount = 5900* 0.02 = $118

Thus, the purchases will be recorded at an amount that is net of discount.

Purchases will be recorded at = 5900 - 118  =  $5782