Question

Q 5.7: Hale Company sells merchandise on account for $1,000 to Long Company with credit terms of 2/10, n/30. Long Company returns $200 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Answer 1

Answer:

Ans. The amount of the check is $784

Explanation:

Hi, from the initial balance of $1,000, we have to substract the returned merchandise, which was $200, therefore, Long Company owes Hale Company, $800 if Long Company pays within day 11th to 30th of the day of purchase. Since Long Company plans to pay within the first 10 days from the date of purchase, they would be granted a 2% discount on their remaining balance, therefore, the amount that Long Company has to write the check for is:

$Check=Remaining Balance*(1-Discount)$

It should look like this

$Check=800*(1-0.02)=784$

So, Long would have to write a check for $784, that is if it pays within the first 10 days from the date of purchase.

Best of luck.