Question

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $18,000. The seller paid transportation costs of $1,000 and issued a credit memorandum for $5,000 for merchandise returned. What is the amount of the cash discount allowable?

Answer 1

$130

Step-by-step explanation:

The amount of the cash discount allowable is $130.

This is calculated using the following formula:

• (total sales - returned merchandise) x 1%

cash discount allowable = ($18,000 - $5,000) x 1% = $13,000 x 1% = $130

The transportation costs ($1,000) are not included in this calculation.