Question

On January 15, Cheyenne Corp. sells merchandise on account to Flounder Associates for $4500 with terms 2/10, n/30. On January 20, Flounder returns merchandise worth $1100 to Cheyenne. On January 24, payment is received from Flounder for the balance due. What is the amount of cash received?

Answer 1

Answer:

The amount of cash received on January 24 is $3332

Explanation:

The amount of cash received will be for the net amount of receivable after adjusting for sales returns and the sales discount as the payment is received within the discount period of 10 days as stated by the term 2/10 which means a 2% discount if payment is received within 10 days of sale.

The accounts receivable at January 15 after sale were $4500. Out of this amount, $1100 of returns are made. Thus, the remaining balance of accounts receivables after return is $4500 - $1100 = $3400

The discount received will be = 3400 * 2% =  $68

Thus, the cash received on January 24 will be 3400 - 68  =  $3332