Reference no: EM132565716

ABC Co sold goods with a list price of $1,400 to Green which was subject to trade discount of 4% and early settlement discount of 5% if the invoice was paid within 7 days. The normal credit period available to credit customers is 30 days from invoice date. At the point of sale, Green was expected to take advantage of the early settlement discount terms offered.

Question 1: If, on this occasion, Green did not pay within the settlement discount period, what accounting entries should be made by ABC Co to record settlement of the amount outstanding?

Option a) Debit Cash $1,400 Credit Trade receivables $1,400

Option b) Debit Cash $1,344, Credit Trade receivables $1,276.80 and Credit Revenue $67.20

Option c) Debit Cash $1,344 and Credit Trade receivables $1,344

Option d) Debit Cash $1,276.80, and Credit Trade receivables $1,276.80