Question

Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

Answer 1

Answer and Explanation:

The computation is shown below:

a. The amount that should be paid is

= $4,500 - $1,200 - ($4,500 - $1,200) × 2%) + $140

= $4,500 - $1,200 - $66 + $140

= $3,374

And,

b. The amount that should be paid is

= $7,650 - $450 - ($7,650 - $450) × 1%

= $7,650 - $450 - $72

= $7,128

In this way the amount to be paid in full could be determined