Question

Use the following to answer questions 1 – 5 For the next few weeks CJM Ad Agency is offering a 10% trade discount when providing advertising services of $30,000 or more to its customers to encourage customers to buy more advertising. The Agency also offers 3/5, n30 on all credit sales. All credit sales are invoiced at the end of the month. The Agency provided the following services this month; amounts are shown before trade discounts have been deducted:

• Designs a $30,000 ad campaign for Customer A— on account— pays in 30 days

• Designs a $35,000 ad campaign for Customer B— on account— pays within 5 days

• Designs a $21,000 ad campaign for Customer C— on account— pays within 5 days

• Designs a $18,000 ad campaign for Customer D—received payment last month

1. $___________What amount of Service revenue should the Agency record for Customer A?

2. $___________What amount of Service revenue should the Agency record for Customer B?

3. $___________Customer B pays within 5 days, how much will they pay?

4. $___________Determine the monthly Service revenue for the Agency

5. $___________Determine the Agency’s Net service revenue for the month

Answer 1

ANSWER

1. $27,000. ( $30,000 - 10% of $30,000 as trade discount)

2. $31,500. ( $35,000 - 10 % of $35,000 as trade discount)

3. $30555. ( $31,500 - 3% of $31,500 as sales discount )

4. Monthly service revenue will be:

From A - $27,000

From B - $31,500

From C - $21,000

Total - $79,5900

Payment from customer D will not be considered as payment was received last month.

5. Net service revenue for the month.

From A - $27,000

From B - $30,555 ( $31,500 - 3% sales discount)

From C - $20,370. ( $21,000 - 3% sales discount)

Total - $77,925

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