Question

Purchased inventory that cost 12,000 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of 880 were paid in cash. What is the total amount due if the payment is made within the discount period?

1) 11,760
2) 11,920
3) 11,440
4) 12,000

Answer 1

The total amount due if the payment is made within the discount period is $11,640.

Step-by-step explanation:

To calculate the total amount due if the payment is made within the discount period, we need to consider three components: the cost of the inventory, the freight costs, and the discount.

The cost of the inventory is $12,000. The freight costs are $880. The discount is 2% of the cost of the inventory.

To calculate the discount, we multiply the cost of the inventory by the discount rate:

$12,000 x 0.02 = $240

So the total amount due, if the payment is made within the discount period, is:

$12,000 + $880 - $240 = $11,640