Question

Bally Manufacturing sent intel corporation for machinery with a 13,800 list price. Bally dated the invoice August 08 with 1/10 EOM terms. Intel receives a 20% trade discount. Intel pays the invoce on August 21, on August 21, Intel Corporatin returns $800 of the machinery due to defects. What does intel pay Bally on August 21?

Answer 1

List Price = $13,800
Merchandise Returned = $800

New List Price = List Price - Merchandise Returned
New List Price = $13,800 - $800
New List Price = $13,000

Net Price after trade discount = New List Price * (1 - Trade discount)
Net Price after trade discount = $13,000 * (1 - 0.20)
Net Price after trade discount = $10,400

Amount Paid = Net Price after trade discount * (1 - Cash discount)
Amount Paid = $10,400 * (1 - 0.01)
Amount Paid = $10,400 * 0.99
Amount Paid = $10,296

So, Intel paid $10,296 to Bally on August 21.