Question

A company using the perpetual inventory system purchased inventory worth​ $20,000 on account with terms of​ 2/10, n/30. Defective inventory of​ $3,000 was returned two days​ later, and the accounts were appropriately adjusted. If the invoice is paid within 10​ days, the amount of the purchase discount that would be available to the company is​ ________.

Answer 1

Credit Terms of Purchase: 2/10, n/30

This means 2% discount is allowed if payment is made within 10 days.

Since the invoice is paid within 10 days, discount is available to the company. However, the purchase returns should be adjusted to the purchases.

Purchases = $20,000

Purchase Returns due to defect = $3,000

Net Purchases

= Purchases - Purchase Returns

= $20,000 - $3,000

= $17,000

Amount of Purchase Discount

= Net Purchases * Discount Rate

= $17,000 * 2%

= $340

Amount of Purchase Discount available to the company is $340.