JAMB Principles of Accounts 2001 Question 8

Question 8

Cash Book

Hauwa Ltd bought 10 bags of rice for ₦500 each. The company was given 5% and 12% trade and cash discounts respectively. What will be recorded as discount received in the company's book?

A.₦250
B.₦570
C.₦600
D.₦850.

Show the answer and explanation

Answer: B (₦570)

Explanation

List price 5,000 less 5% trade discount = 4,750. Cash discount = 12% × 4,750 = ₦570. Trade discount is not recorded.