JAMB Accounts Principles of Accounts 2014 Paper

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Question : 9

Total: 49

If Emeka Enterprises settles its suppliers for goods purchased within 7 days, it can earn a cash discount of 12 and half percent. Assuming #22,800 worth of goods were purchased and settled within 5 days, what will be the amount to be credited in the cash column of the company's cash book?

#25,650
#22,800
#19,950
#18,240

Solution:

Concept:

A cash discount is deducted from the amount payable, and the cash book credit entry is the actual cash paid.

Explanation:

Discount rate is

12.5\% = \frac{1}{8}

.

Discount received

= \frac{12.5}{100} \times 22,800 = 2,850

.

Cash paid =

22,800 - 2,850 = 19,950

.

This is the amount credited in the cash column.

Answer:

C. #19,950

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