Aroma Company used the net price method of accounting for cash discounts. In one of its transactions on December 26, 2021, the entity sold merchandise with a list price of P5,000,000 to a customer who was given a trade discounts of 20%, 10% and 5%. Credit terms were 4/10, n/30. The goods were shipped FOB destination, freight collect. Total freight charge paid by the customer was P100,000. On December 27, 2021, the customer returned damaged goods originally billed at P500,000.

Aroma Company used the net price method of accounting for cash discounts. In one of its transactions on December 26, 2021, the entity sold merchandise with a list price of P5,000,000 to a customer who was given a trade discounts of 20%, 10% and 5%. Credit terms were 4/10, n/30. The goods were shipped FOB destination, freight collect. Total freight charge paid by the customer was P100,000. On December 27, 2021, the customer returned damaged goods originally billed at P500,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Aroma Company used the net price method of accounting for
cash discounts. In one of its transactions on December 26,
2021, the entity sold merchandise with a list price of
P5,000,000 to a customer who was given a trade discounts of
20%, 10% and 5%. Credit terms were 4/10, n/30.
The goods were shipped FOB destination, freight collect.
Total freight charge paid by the customer was P100,000. On
December 27, 2021, the customer returned damaged goods
originally billed at P500,000.
What amount should be reported as net realizable value of
the accounts receivable on December 31, 2021?
a. 3,420,000
b. 2,920,000
c. 2,703,200
d. 2,803,200

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Step 1 - Calculation of Gross Sale Value after Trade Discount :

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Aroma Company used the net price method of accounting for cash discounts .In one of its transactions on December 26,2021,the entity sold merchandise with a list price of P5,000,000 to a customer who was given a trade discount of 20%,10% and 5%.Credit terms were 4/10n/30. The goods were shipped FOB destination, freight collect. Total freight charge paid by the customer was P100,000.On December 27,2021, the customer returned damaged goods originally billed at P500,000. What is the net realizable value of the accounts receivable on December 31,2021?
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