Question

Simmons sold merchandise to Drafke for $5,000 with payment terms of 2/10, n/30. Two days later, Drafke returned two of the units and received account credit in the amount of $2,000. If Drafke pays his account in full within ten days of the invoice date, what is the amount of the sales discount?

Answer 1

Answer:

The amount of the sales discount is $60.

Explanation:

The with payment terms of 2/10, n/30 imply that Drafke will enjoy 2% discount if he pays within 10 days; but after the first 10 days, the full invoice amount payable will be due for payment in 30 days without the 2% discount.

From the question, we have:

Total credit sales = $5,000

Sales return = $2,000

Net credit sales = Total credit sales - Sales return = $5,000 - $2,000 = $3,000

If Drafke pays his account in full within ten days of the invoice date, he will enjoy the 2% discount rate. Therefore, we have:

Discount amount = Net credit sales * Discount rate = $3,000 * 2% = $60

Therefore, the amount of the sales discount is $60.