Question

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping point. The company paid the freight charge, $500. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:

Answer 1

Answer:

The cash paid on June 24 equals is $8,924

Explanation:

The computation of cash paid is shown below:

= Purchase amount - returned goods - discount rate of remaining balance

where,

Purchase amount is $10,000

Returned goods is $800

So, the balance would be

= Purchase amount - returned goods

= $10,000 - $7800

=$9,200

Now, discount is = Remaining balance × discount rate

                            = $9,200 × 3%

                            = $276

Since, the balance is paid on June 24 and the material is purchased on 15 June so 3/10 discount rates applies. Here, 3/10 means 3% discount if payment is made within 10 days.

So, the cash paid is

=Remaining balance - discount

= $9,200 - $276

= $8,924

Hence,  The cash paid on June 24 equals is $8,924