What is the effect of the payment received from the customer who paid within the discount period, on the Financial Statements (Balance Sheet and Income Statement) of the business?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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At the beginning of the month a company recorded a sale on account, terms were 2/10; n/30.

What is the effect of the payment received from the customer who paid within the discount period, on the Financial Statements (Balance Sheet and Income Statement) of the business?

Group of answer choices
There is no effect on the Balance Sheet(total assets, liabilities and stockholders’ equity remain the same)Increase to Net Income
Assets decreaseDecrease to Net Income
Assets decrease, Liabilities increaseNo effect on Net Income
Assets increase, Revenue increasesDecrease to Net Income
Expert Solution
Step 1

2/10; n/30:- The term 2/10 in these situations means, 2 is 2% discount either receivable or allowed. 10 is number days. n/30 means, no discount is allowed if paid in 30 days. This is often used by the sellers to attract customers again and again and to get their money soon from the debtors.  

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