A Firm Sells Inventory for $1 000, Including GST, on Credit

question 12

Multiple Choice

A firm sells inventory for $1 000, including GST, on credit with terms of 2/10, n/30. Defective inventory of $200, including GST, is returned 2 days later. Which of the following entries would be made to record the cash receipt for the sale if the payment is received within 10 days?

• A)The accounting entry would be an $800 debit to Cash and an $800 credit to Accounts receivable.
• B)The accounting entry would be a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing, an $800 debit to Cash and an $816 credit to Accounts receivable.
• C)The accounting entry would be a $784 debit to Cash, a $14.55 debit to Sales discounts, a $1.45 debit to GST Clearing and an $800 credit to Accounts receivable.
• D)The accounting entry would be an $800 debit to Cash, a $14.55 credit to Sales discounts, a $1.45 credit to GST Clearing and a $784 credit to Accounts receivable.

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Definitions:

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