Question

Willetta Company purchases inventory for $11,000 with terms 2/10, n/30. It then returns $2100 of the inventory purchased to the supplier and also receives an allowance for defective inventory of $110. The company pays the amount due within the discount period. What is the amount of the discount that will be taken?

Answer 1

The amount of discount that will be taken is $176.

Step-by-step explanation

The amount of discount that will be taken shall be based on the value of accounts payable that is eligible for payment after the final adjustments have been made.

The accounts receiveable amount after adjustment of returned purchases and defective goods is calculated below;

Accounts receiveable and eligeable for payment = Purchase inventory-Returned inventory purchase - Allowance for defective inventory

Therefore;

Accounts receiveable and eligeable for payments =$11,000 - $2,100 - $110

=$8,790

Therefore;

The account payable that is eligible for discount amount is $8,790*0.02

=175.8

=$176. Rounded to the nearest dollar amount.