Question

On June 1, Lulu's Performing Arts School purchased merchandise with a list price of $5,500 from Monty's Inc. with credit terms 2/10, n/30. On June 3, Lulu's returns $1,000 of the merchandise.
Required:
Compute the amount owed by Lulu's if the store pays within the discount period.

Answer 1

Answer:

$4,410

Explanation:

Discount refers the amount that is deducted from the usal price of a good sold or service rendered.

From the question, the credit terms 2/10, n/30 implies 2% discount if the amount owed is paid within 10 days while no discount will be enjoyed if the amount owed is paid after 10 days but must be beyond 30 days.

Therefore, the amount owed by Lulu's if the store pays within the discount period, i.e. within 10 days, can be calculated as follows:

Discount = (Purchases - Merchandise returned) * 2% = ($5,500 - $1,000) * 2% = $90

Amount owed = Purchases - Merchandise returned - Discount = $5,500 - $1,000 - 90 = $4,410.

Therefore, the amount owed by Lulu's if the store pays within the discount period is $4,410.