Question

Hoffman Company purchased merchandise on account from a supplier for $65,000, terms 1/10, n/30. Hoffman returned $7,500 of the merchandise and received full credit. I would like to see steps how to do this problem

Answer 1

Hoffman Company purchased merchandise on account from a supplier for $65,000, terms 1/10, n/30. Hoffman returned $7,500 of the merchandise and received full credit.

Purchase price of inventory = $65,000

Value of inventory returned = $7,500

Hence, remaining amount to be paid on account of purchase of goods = $65,000 - 7,500

= $57,500

Terms of payment are 1/10, n/30, which means 1% discount will be allowed by the seller to the buyer if payment is made within 10 days and no discount will be allowed if payment is made after 10 days and within 30 days.

Since Hoffman received full credit, hence he must have made payment within the discount period.

Hence, discount received = 57,500 x 1%

= $575

Hence, net payment to be made by Hoffman = 57,500 - 575

= $56,925

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