Delta, Inc. sells to wholesalers on terms of 2/15, net 30. Delta has no cash sales but 50% of Delta’s customers take advantage of the discount. Delta uses the gross method of recording sales and trade receivables. An analysis of Delta’s trade receivables balances at December 31, 2006, revealed the following:
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|
Age |
Amount |
Collectible |
|
0 – 15 days |
$100,000 |
100% |
|
16 – 30 days |
60,000 |
95% |
|
31 – 60 days |
5,000 |
90% |
|
Over 60 days |
2,500 |
$500 |
|
$167,500 |
In its December 31, 2006 balance sheet, what amount should Delta report for allowance for discounts?
- $1,000
- $1,620
- $1,675
- $2,000