Questions: Carson went to a merchandisers' market on November 16th and purchased 20 drills at 125 each. The terms of payment of the invoice were 2% 15, Net 30. When he returned to his office on November 20th, he wrote out and mailed a check to pay the invoice. 50 will be recorded in his a.) sales discount account b.) purchases discount account c.) purchases account d.) sales account

Solution Steps

To determine the correct account for the $50 discount, we need to understand the terms of the invoice. The terms "2% 15, Net 30" mean that Carson can take a 2% discount if he pays within 15 days. Since he paid on November 20th, which is within the 15-day period, he is eligible for the discount. The discount is related to a purchase, so it should be recorded in the purchases discount account.

The total cost of the drills is calculated by multiplying the cost per drill by the number of drills purchased. Given that each drill costs \(\$125\) and Carson purchased 20 drills, the total cost is: \[ \text{Total Cost} = 125 \times 20 = 2500 \]

The terms of payment allow for a 2% discount if paid within 15 days. Carson paid within this period, so he is eligible for the discount. The discount amount is calculated as 2% of the total cost: \[ \text{Discount Amount} = 2500 \times 0.02 = 50.0 \]

The discount is related to a purchase, so it should be recorded in the purchases discount account. This is because the discount reduces the cost of the purchase.

Final Answer