Question

The equipment was purchased on account for $30,000. The credit terms were 3/10, n/30. The payment was made within the discount period and the company records the purchases of equipment net of discounts. What was the net amount recorded for the purchase of equipment?

Answer 1

The net amount recorded for the purchase of the equipment is $29,100 after a 3% discount on the initial price of $30,000 was applied for paying within the discount period.

Step-by-step explanation:

The net amount recorded for the purchase of equipment by a company. The equipment was initially priced at $30,000 with a discount term of 3/10, n/30. This means that the company is entitled to a 3% discount if the payment is made within 10 days; otherwise, the net (full) amount is due within 30 days. Since the payment was made within the discount period, we calculate the discount as 3% of $30,000, which is $900. Therefore, the net amount recorded for the purchase is $30,000 - $900 = $29,100.

The net amount recorded for the purchase of equipment, taking into account the early payment discount within the specified credit terms, is $29,100. This practice ensures accurate financial reporting and reflects the discounted value of the equipment in the company's records.