Question

Marx Wholesale has the following transactions during the month of July, 2021:

July 1 Purchased inventory from Groucho Inc. for $20,000, FOB destination,
terms 2/10 N/30.
July 2 The appropriate company paid $100 freight on the July 1 purchase.
July 6 Returned $4,000 worth of goods to Groucho as they were the wrong
colour.
July 7 Sold half of the remaining inventory purchased from Groucho to Chico Inc.
for $12,000, FOB destination, terms 2/20 N/30.
July 8 The appropriate company paid $90 freight on the July 7 sale.
July 10 Paid Groucho the entire amount owed to him.
July 12 Purchased inventory worth $6,000 from Harpo Inc., FOB shipping point,
terms 3/15 N/45.
July 13 The appropriate company paid $50 freight on the July 12 purchase.
July 17 Sold half of the inventory purchased from Harpo to Zeppo Ltd. for $5,000,
FOB shipping point, terms 1/10 N/20.
July 18 The appropriate company paid $60 freight on the July 17 sale.
July 22 Zeppo returned $1,500 worth of the goods bought on July 17 as you
shipped the wrong size.
July 25 Zeppo paid their outstanding balance.
July 30 Chico paid their outstanding balance.
July 31 Paid Harpo the entire amount owed to him.
How much does Marx Wholesale pay Groucho on July 10?

Answer 1

Marx Wholesale pays Groucho $15,680 on July 10, accounting for the initial purchase of $20,000, the return of $4,000 worth of goods, and the early payment discount of 2% on the remaining amount.

Step-by-step explanation:

To determine how much Marx Wholesale pays Groucho on July 10, we need to account for the purchase, returns, and any discounts applied. Here is a breakdown of the transactions:

• Initial purchase on July 1: $20,000
• Returned goods on July 6: -$4,000
• Payment terms discount 2/10 N/30: 2% of ($20,000 - $4,000)

Applying the 2% discount for early payment (within 10 days), we calculate the discount amount as follows:

Discount = 2% x ($20,000 - $4,000) = 0.02 x $16,000 = $320

The amount payable after the discount is then:

Payable amount = Purchase amount - Returns - Discount = $20,000 - $4,000 - $320 = $15,680

Hence, on July 10, Marx Wholesale pays Groucho $15,680.