Question

Jorgensen Jelly Bean Co. purchased raw materials with a catalog price of $70,000. Credit terms of 5/15, n/60 apply. If Jorgensen uses the net price method, the purchase should be recorded at

a. $70,000
b. $66,500
c. $59,500
d. $42,000

Answer 1

The purchase should be recorded at $66,500 using the net price method with a 5% discount on the original amount of $70,000.

Step-by-step explanation:

The student asked about recording the purchase of raw materials using the net price method when the credit terms are 5/15, n/60. This means that Jorgensen Jelly Bean Co. has an option to take a 5% discount if the payment is made within 15 days, otherwise the net amount is due in 60 days. When using the net price method, the purchase is recorded assuming the discount is taken. Therefore, 5% of $70,000 is $3,500. So the purchase should be recorded at $70,000 - $3,500, which equals $66,500.