Question

Trane Company purchased merchandise inventory with an invoice price of $4,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Trane Company pays within the discount period?

Answer 1

The net cost of the goods if Trane Company pays within the discount period is $3,920, after applying a 2% discount on the $4,000 invoice price.

Step-by-step explanation:

The net cost of the goods for Trane Company if they pay within the discount period can be calculated by first determining the discount Trane Company is eligible for. The credit terms 2/10, n/30 means that Trane Company can take a 2% discount off the invoice price if they pay within 10 days. Otherwise, the net amount is due in 30 days. To calculate the discount:

• Calculate 2% of $4,000, which is $4,000 × 0.02 = $80.
• Subtract the discount from the invoice price: $4,000 - $80 = $3,920.

Therefore, the net cost of the goods if Trane Company pays within the discount period is $3,920.