Question

Problem 2.

Details of a purchase invoice and related credit memo are summarized as follows: Invoice: Cost of merchandise listed on purchase invoice $6,500 Prepaid freight charge added to invoice 150 Terms, FOB shipping point, 1/10, n/eom Credit memo: Cost of merchandise returned $1,500 Assume that the credit memo was received prior to payment and that the invoice is paid within the discount period. Determine the following:

(a) Amount of the cash discount allowed. $___________________ Show your work:

(b) Amount to be paid by the purchaser if the discount is taken. $_________________ Show your work:

(c) Cost of the merchandise to the purchaser if the discount is NOT taken. $________________

Answer 1

Answer-a)- Amount of the cash discount allowed = (Cost of merchandise purchased- Cost of merchandise returned)*Discount rate

= ($6500-$1500)*1%

= $50

b)- Amount to be paid by the purchaser if the discount is taken = Cost of merchandise purchased+ Freight chares- Cost of merchandise returned- Cash discount

= $6500+$150-$1500-$50

= $5100

c)- Cost of the merchandise to the purchaser if the discount is NOT taken = Cost of merchandise purchased+ Freight chares- Cost of merchandise returned

= $6500+$150-$1500

= $5150