Question

Buehler Company on June 15th sells merchandise on account to Chaz Co. for $1,000, terms 2/10, n/30. On June 20th, Chaz Co. returns merchandise worth $300 to Buehler Company. On June 24th, payment is received from Chaz Co. for the balance due. What is the amount of cash received?

A. $780
B. $686
C. $680
D. $700

Answer 1

B. $686

Step-by-step explanation:

The payment terms 2/10, n/30 implies that if Chaz pays within the next 10 days of purchase, it will receive a discount of 2% of the net invoice amount and that the latest date for the settlement of bill is within the next 30 days of purchase.

The latest payment date to qualify for discount is June 25th i.e ( June 15 + 10) but the payment was made by June 24th , so this qualifies Chaz Co for the discount.

The net amount of cash received by Blue Company is

Net amount due = Invoice bill - Returns × 98%

= (1000 - 3000)× 98%

= $686