Question

Charlet Company sells office chairs to its customers. On June 10, Charlet purchased 40 office chairs from one of its suppliers, paying $120 per chair. On July 5, Rutherford Corporation purchased 18 of these office chairs from Charlet for a list price of $200 each. Rutherford returned 3 of the chairs on July 7, paid one-half of its bill on July 16 and paid the other one-half of July 29. Charlet offers credit terms of 5/15, n/40 to its customers.

Calculate the amount of gross profit Charlet Company earned from its sale to Rutherford Corporation.

Please include your working. Thank you.

Answer 1

Credit terms of 5/15, n/40 means that amount paid within the first fifteen days will get a discount of 5%. after that no discount will be there. but it should paid within 40 days.

Sale value of 15 (18-3) chairs ($200*15)	$   3,000
Less: Cost of goods sold (15*$120)	$ (1,800)
Less: sales discount allowed ($3,000 / 2 * 5%)	$       (75)
Gorss profit earned by Charlet company from sale to Rutherford	$   1,125