Question

Devonshire, Inc. sold merchandise inventory on account at a price of $6,000 with payment terms of 2/10, n/30. The merchandise cost Devonshire $1,000. If the customer paid for the merchandise 5 days after receiving the invoice, how much cash was collected by Devonshire?

Answer 1

Answer:

$5880

Explanation:

The payment term of 2/10,n/30 means that if a customer/client pays up the cost of the merchandise within 10 days of purchase the customer will enjoy an additional 2 percent of the cost price of the merchandise

Initial cost of merchandise = $6000

cost price for devonshire = $1000

time of payment = 5 days therefore the customer qualify for a 2 percent discount

the amount to be collected by Devonshire would be = $6000 - (2% of $6000)

                                                                                = $6000 - $120 = $5880

Answer 2

Answer:

$5,880

Explanation:

Remember the payment term 2/10, net 30 implies that the customer is given 2% discount if he can pay the invoice within 10 days. If unable to do so, the customer pays the before the end of 30 days after the date of the invoice.

The customer then paid Devonshire, Inc. the invoice after 5 days which is within 10 days, so a discount of 2% will apply.

The amount received was $6000 - (6000 x 0.02) = 6000 - 120 = $5880

Therefore money collected by Devonshire is $5,880.