Page 365 - F3 -FA Integrated Workbook STUDENT 2018-19

Answers

Example 3

Early settlement discount with credit customers

Hannah entered into the following transactions:

1 Sold goods to Alex which had a list price of $10,000, and which were
subject to an early settlement discount of 5% if Alex paid within seven
days. Alex was expected to pay early and did subsequently make early
payment to take advantage of the early settlement terms.

2 Sold goods to Lynn which had a list price of $6,000, and which were
subject to an early settlement discount of 5% if Lynn paid within seven
days. Lynn was expected to pay early to take advantage of the discount
terms offered but did not do so.

3 Sold goods to Alison which had a list price of $9,000, and which were
subject to an early settlement discount of 5% if Alison paid within seven
days. Alison was not expected to pay early to take advantage of the
discount terms offered and subsequenltly paid, as expected, after 30
days.
4 Sold goods to Lisa which had a list price of $8,000, and which were
subject to an early settlement discount of 5% if Lisa paid within seven
days. Lisa was not expected to pay early. However, Lisa subsequently
did pay early to take advantage of the early settlement discout terms.

Required:

For each of the transactions:

1 state the amount of the receivable initially recorded by Hannah,
and

2 state the accounting entries required to record the subsequent
cash receipt and clearance of the receivable.

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