Question

Company A purchases $1,200 of merchandise from Company B on July 1 with credit terms 2/10, n/30. Company A returns $200 of the merchandise on July 5. On July 11, Company B received full payment from Company A. The amount of the payment on July 11 is $20. $1,000. $1,176. $980.

Answer 1

Answer:

The correct answer is D that is $980

Explanation:

The amount of payment which is received by company B will be computed as:

Amount of payment = Purchase Amount - Return amount - Discount allowed

where

Purchase Amount is $1200

Return amount is $200

Discount allowed is 2%

So, computing amount of discount allowed as:

Discount allowed = (Purchase Amount - Return Amount) x % Discount allowed

= ($1,200 - $200) x 2%

= $1,000 x 2%

= $20

Putting the values above:

= Amount of payment = $1,200 - $200 - $20

= $1,000 - $20

= $980

NOTE: Discount is allowed as it is mentioned if the payment is received within 10 days then 2% will be allowed, which is mentioned as (2/10). So, company made purchase on 1 July and on July 11, the payment is made. Therefore, allowed the discount of 2%