Question

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On March 15, Babson returns some of the merchandise. The selling price of the merchandise is $600 and the cost of the merchandise returned is $350. Babson pays the invoice on March 20, and takes the appropriate discount. The amount that Klein receives from Babson on March 20 is:

Answer 1

$7,056

Step-by-step explanation:

The computation of the amount received is shown below:

= Sale value of the merchandise - selling price of the merchandise returned - discount

where,

Discount is

= (Sale value of the merchandise - selling price of the merchandise returned) × discount rate percentage

= ($7,800 - $600) 2%

= $144

So, the amount received is

= $7,800 - $600 - $144

= $7,056

We simply applied the above formula