Question

Etcetera Clothing sold merchandise inventory on account at a price of $11,000 with payment terms of 2/10, n/30. The merchandise cost Etcetera Clothing $6,000. If the customer paid for the merchandise 5 days after receiving the invoice, how much cash was collected by Etcetera Clothing

Answer 1

Answer:

Etcetera Clothing collected $10,780

Explanation:

Etcetera Clothing  sells merchandise inventory on terms of 2/10, n/30, which means that it will give a cash discount to a customer of 2% when the payment is made within 10 days and the whole settlement of account must be made in 30 days.

If the customer paid for the merchandise 5 days after receiving the invoice, the customer was granted the cash discount since the payment is still within the discount period.

The amount of cash discount is $11,000 × 2% = $220

Payment made to Etcetera Clothing will be $11,000 - $220 = $10,780

Answer 2

Answer:

Etcetera Clothing sold merchandise inventory on account at a price of $11,000 with payment terms of 2/10, n/30. The merchandise cost Etcetera Clothing $6,000. If the customer paid for the merchandise 5 days after receiving the invoice, how much cash was collected by Etcetera Clothing.

The cash collected by Etcetera Clothing  =$10,780

Explanation:

Cash collected = sales amount - less discount given

                           = $11,000 - $11000 at 2%

                          = $11,000 - $11000(0.02)

                         = $11000 - $220

Cash collected = $10,780

Therefore, based on the calculation made as above, the cash collected by Etcetera Clothing  = $10,780