Question

On January 15, Marigold Corp. sells merchandise on account to Bramble Associates for $5700 with terms 2/10, n/30. On January 20, Bramble returns merchandise worth $1100 to Marigold. On January 24, payment is received from Bramble for the balance due. What is the amount of cash received

Answer 1

Marigold Corp.

The amount received from Bramble is $4,508.

Step-by-step explanation:

a) Computation of Amount Received:

Jan. 15 Sales = $5,700

Jan. 20 Returns (1,100)

Balance due $4,600

Jan. 24 discount ($92)

Cash collected $4,508

b) Discount allowed = 2% of $4,600 = $92

c) This is in accordance with the trade terms 2/10, n/30, which allows a cash discount of 2% if payment was made within 10 days from the date of purchase, with the last allowed credit within one month. From January 15 to January 24 is 10 days. So, the cash discount of 2% applies on the balance due after the sales returns.