Question

A company purchased $12,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping point. The freight charge was $700. On June 20, it returned $900 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 company will pay $10,767 for the merchandise on June 24 after taking a 3% discount on the reduced amount of $11,100, which accounts for the return of merchandise and excluding the freight charge since it's FOB shipping point.

Step-by-step explanation:

The cash paid on June 24 for the merchandise by the company can be calculated by taking into account the discount terms, the return of merchandise, and the freight charge. Initially, the company purchased merchandise worth $12,000, with a 3% discount if paid within 10 days, which means the discount deadline is June 25 (3/10, n/45 terms). The company then returned merchandise worth $900 before this discount deadline, which reduces the amount subject to the discount to $11,100.

Given the purchase terms include 'FOB shipping point,' the freight charge of $700 is paid by the buyer and does not affect the discount calculation. Therefore, the payment amount eligible for the discount remains at $11,100. To compute the discount, we take 3% of $11,100, which is $333. The amount after applying the discount is $11,100 - $333 = $10,767. Hence, on June 24, the company will pay $10,767 for the merchandise.