On August 6, A&B Construction Has Three Outstanding Invoices Payable

question 204

Short Answer

On August 6, A&B Construction has three outstanding invoices payable to Excel Builder's Supply. Invoice 535, dated July 16, is for $3,228.56; Invoice 598, dated July 24, is for $2,945.31; and Invoice 678, dated August 3, is for $6217.69. All invoices have terms 4/10, 2/20, n/60. If A&B makes a $10,000 payment to Excel on August 6, what further payment on August 15 will settle the account? Note that Excel applies payments to the oldest invoices first.

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Definitions:

Accounting Principle

A general rule or guideline that prescribes the methodology for recording financial transactions and preparing financial statements.

Asset Account

An accounting record that shows the amount of economic resources owned or controlled by an entity.

Liability Account

An account on the balance sheet representing obligations to pay money or deliver goods or services to another party in the future.

Tornado Damage

The destruction or damage caused to structures, lands, and properties as a result of a tornado, a rapidly rotating column of air in contact with both the surface of the Earth and a cumulonimbus cloud or, in rare cases, the base of a cumulus cloud.