Question 1

Section A

A company purchases goods with a list price of $10,000. The supplier offers a 5% trade discount and a 2% early settlement discount if payment is made within 10 days. The company intends to take the settlement discount.

At what amount should the purchases be initially recorded?

Accepted Answer

1. Deduct the trade discount first. 2. If the settlement discount is expected to be taken, deduct it from the net amount to find the initial recording value.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the 2% discount on the original $10,000, or not deducting the settlement discount at all.

Section A

A company purchases goods with a list price of $10,000. The supplier offers a 5% trade discount and a 2% early settlement discount if payment is made within 10 days. The company intends to take the settlement discount.

At what amount should the purchases be initially recorded?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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