Question

Devonshire, Inc. sold merchandise inventory on account at a price of $17,000 with payment terms of 2/10, n/30. The merchandise cost Devonshire $13,000. If the customer paid for the merchandise 5 days after receiving the invoice, how much cash was collected by Devonshire?

Answer 1

Answer:

$16,660

Explanation:

Given that,

Merchandise inventory sold on account = $17,000

Payment terms are as follows: 2/10, n/30

Cost of merchandise sold = $13,000

Therefore, the amount of cash was collected by Devonshire is the amount of cash after deducting the 2 percent of merchandise inventory.

Cash was collected by Devonshire:

= Amount of merchandise sold × (1 - 2%)

= $17,000 × (1 - 0.02)

= $17,000 × 0.98

= $16,660