Question

A company purchases merchandise with a catalog price of $30,000. The company receives a 40% trade discount from the seller. The seller also offers credit terms of 1/10, n/30. Assuming no returns were made and that payment was made within the discount period, what is the net cost of the merchandise?

Answer 1

Answer:

$17,820

Explanation:

Data provided in the question:

Catalog price of the merchandise = $30,000

Trade discount received = 40%

The amount of discount received = 40% of $30,000

= 0.4 × $30,000

= $12,000

Therefore,

Cost of Merchandise = Catalog price - Discount

= $30,000 - $12,000

= $18,000

also,

credit terms = 1/10, n/30

since, the payment was made within the discount period

1% of discount will be provided

thus,

amount of discount = 1% of cost of merchandise

= 0.01 × $18,000

= $180

hence,

Net cost of the merchandise

= Cost of merchandise - Discount on credit terms

= $18,000 - $180

= $17,820