The Collection of a $1,000 Account Paid Within the 2

question 12

Multiple Choice

The collection of a $1,000 account paid within the 2 percent discount period will result in a

• A)credit to Cash for $980.
• B)credit to Accounts Receivable for $1,000.
• C)debit to Cash for $1,000.
• D)credit to Accounts Receivable for $980.

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Definitions:

Liquidity Problem

A liquidity problem occurs when an individual or organization struggles to convert assets into cash quickly without significant losses in value, potentially affecting their ability to meet immediate financial obligations.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including repayment schedule, interest rate, and the timeframe of the loan.

DuPont System

A financial analysis method that breaks down return on equity into three parts: profit margin, asset turnover, and financial leverage, to assess a company's financial performance.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a specific period.