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Chapter 5: Q5-9RQ (page 294)

What would the credit terms of 鈥�2/10, n/EOM鈥� mean?

Short Answer

Expert verified

The credit term 鈥�2/10, n/EOM means that the company can deduct 2% from the bill amount if the payment is made within 10 days.

Step by step solution

01

Meaning of Credit Term

In accounting, credit term refers to the payment terms associated with an invoice, which are mentioned on it. It presents anagreement between the buyer and seller regarding the payments required to be received againstgoods sold on credit.

02

The credit terms of “2/10, n/EOM” mean

The credit terms "2/10, n/EOM" means that the company can avail 2%discount on the total bill due (excluding the freight amount) if it makes the payment within days of the date mentioned on the invoice. In addition, if the company does not make the payment within ten days, then the entire amount will become due at the end of the month.

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Most popular questions from this chapter

Click Computers has the following transactions in July related to the sale of merchandise inventory.

July 12 Sold computers on account for \(8,000 to a customer, terms 3/15, n/30. The cost of the computers is \)4,800. Click uses the gross method for recording sales revenue.

26 Received payment from the customer on balance due.

Journalize the sales transactions for Click Computers assuming the company uses the perpetual inventory system.

Journalize the following sales transactions for Sanborn Camera Store using the periodic inventory system. Explanations are not required.

Dec. 3, Sanborn sold $41,900 of camera equipment on the account; credit terms are 3/15, n/EOM.

17 Sanborn receives payment from the customer on the amount due to less the discount.

What is the Cost of Goods Sold (COGS), and where is it reported?

What account is debited when recording a purchase of inventory when using the perpetual inventory system?

Question: Capital City Motorcycle鈥檚 selected accounts as of December 31, 2018, follow:

Selling Expenses $ 10,500

Interest Revenue 1,000

Net Sales Revenue 113,500

Cost of Goods Sold 85,000

Administrative Expenses 8,000

Prepare the multi-step income statement for the year ended December 31, 2018.
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