When Goods Are Sold to a Customer with Credit Terms

question 17

Multiple Choice

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will receive a:

• A)15% discount if they pay within 2 days.
• B)2% discount if they pay 15% of the amount due within 30 days.
• C)15% discount if they pay within 30 days.
• D)2% discount if they pay within 15 days.

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Definitions:

Direct Method

a way of preparing the cash flow statement where actual cash flows from operating activities are reported rather than adjusting net income on an accrual basis.

Consolidation Process

The procedure of combining the financial statements of separate subsidiary entities into those of the parent company to present as one financial statement.

Shareholders' Equity

The residual interest in the assets of an entity after deducting liabilities, representing the owners' claim on the company's assets.

Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets.