A Trade Credit Bill of $80,000 with Terms of Sale

question 8

Multiple Choice

A trade credit bill of $80,000 with terms of sale of 2/5, net 30 means the buyer saves ____ if the bill is paid within the discount period.

• A) $400
• B) $1,600
• C) $2,500
• D) $4,000

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Definitions:

Journal Entry

A record of a transaction in the accounting journal that may affect one or more accounts.

Residual Value

The projected worth of an asset at the time of sale, after it has served its purpose.

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life, representing the wear and tear, deterioration, or obsolescence of the asset.

Commercial Substance

The aspect of a business transaction that causes a change in the cash flows or financial stability of the entities involved, indicating a genuine economic effect.