Question

urchases Transactions

Barans Company purchased merchandise on account from a supplier for $12,900, terms 2/10, n/30. Barans returned $2,800 of the merchandise and received full credit.

a. If Barans Company pays the invoice within the discount period, what is the amount of cash required for the payment? If required, round the answer to the nearest dollar.
$

Answer 1

Barans Company purchased merchandise on account from a supplier for $12,900, terms 2/10, n/30. Barans returned $2,800 of the merchandise and received full credit.

This means that a buyer may take a 2% cash discount on the invoice price less any returns or allowances, if payment is made within 10 days of the invoice date (the discount period). If the buyer does not pay in that time, the invoice price, less any returns or allowances, is due 30 days from the invoice date.

Final amount due = Cost of goods purchased - Cost of goods returned

= 12,900 - 2,800

= $10,100

Discount amount = Final amount due x Discount percentage

= 10,100 x 2/100

= $202

Cash payment to be made = Final amount due - Discount amount

= 10,100 - 202

= $9,898

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