Question

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping point. The company paid the freight charge, $500. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:

Answer 1

The cash paid on June 24 for the merchandise after returns and taking the discount is $9,424. This includes the deduction of a 3% discount and addition of freight charges.

Step-by-step explanation:

The student's question pertains to the calculation of the cash paid by a company for merchandise after considering the return of goods and available cash discounts for early payment. The original purchase was on terms of 3/10, n/45, and FOB shipping point, which means if the invoice is paid within 10 days a 3% discount is available, otherwise the net amount is due in 45 days.

Here is the step-by-step calculation:

1. Start with the original purchase amount of $10,000.
2. Deduct the returned merchandise value of $800. The new balance is $10,000 - $800 = $9,200.
3. Since the payment is within the discount period, apply the 3% discount: 3% of $9,200 is $276.
4. Subtract the discount from the new balance: $9,200 - $276 = $8,924.
5. Add the freight charge of $500 since it is FOB shipping point, the purchaser is responsible for the freight charge.
6. The total cash paid on June 24 therefore is $8,924 + $500 = $9,424.