Question

A company performs $1,000 worth of services on account on March 1, with the terms 2/10, n/30. The customer makes the payment on March 7. The receipt of payment will involve a:

A) debit to cash for $1,000
B) credit to Accounts Receivable for $980
C) debit to Sales Discounts for $20
D) credit to Service Revenue for $980

Answer 1

Credit to Accounts Receivable for $980. When the customer makes the payment on March 7, it reduces the amount owed for accounts receivable.

correct option is B.

Step-by-step explanation:

When the customer makes the payment on March 7, it reduces the amount owed for accounts receivable. The terms of 2/10, n/30 indicate that the customer can take a 2% discount if payment is made within 10 days. In this case, the customer did not take the discount, so the full amount of $1,000 minus the discount of $20 ($1,000 x 2%) is credited to Accounts Receivable, resulting in a credit of $980.