Question

A company purchased $11,500 of merchandise on June 15 with terms of 2/10, n/45, and FOB shipping point. The freight charge, $1,250, was added to the invoice amount. On June 20, it returned $2,000 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:

a. $10,650.
b. $10,430.
c. $9,586.
d. $10,330.
e. $9,224.

Answer 1

$10,560

Step-by-step explanation:

Cost of Merchandise = $11,500

Prepaid Freight charge = $1,250

Purchase returns = $2,000

Cash paid on June 24 equals:

= Cost of Merchandise + Prepaid Freight charge - Purchase returns - Discount Eligible @2%

= $11,500 + $1,250 - $2,000 - [($11,500 - $2,000) × 0.02]

= $11,500 + $1,250 - $2,000 - $190

= $10,560