The terms 2 - If Music World returns merchandise worth $100...

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The terms 2/10, n/30 mean the customer may take a two percent discount on the outstanding  balance (original invoice amount less any returns and allowances) if payment occurs within ten days  of the invoice date. If the customer chooses not to take the discount, the outstanding balance is due  within thirty days. An abbreviation that sometimes appears in the credit terms section of an invoice is  EOM , which stands for  end of month . The terms n/15 EOM indicate that the outstanding balance is  due fifteen days after the end of the month in which the invoice is dated. 
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Unformatted text preview: If Music World returns merchandise worth $100 after receiving a $1,000 order, they still owe Music Suppliers, Inc., $900. Assuming the credit terms are 2/10, n/30 and Music World pays the invoice within ten days, the payment equals $882, an amount calculated by subtracting $18 (2% of $900) from the outstanding balance. To record this payment from Music World, Music Suppliers, Inc., makes a compound journal entry that increases (debits) cash for $882, increases (debits) sales discounts for $18, and decreases (credits) accounts receivable for $900....
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