Question

g Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer with an invoice amount of $27,000 which includes pre-paid freight costs of $2,000. The customer was issued a credit memo for $10,000 prior to payment. What is the amount of the cash discount on the sale

Answer 1

Answer: $150

Explanation:

Transportation/ Freight charges as well as the credit memo are not to be included when calculating the discount so;

= 27,000 - 2,000 - 10,000

= $15,000

Terms of 1/10 n/30 means that the sale is subject to a 1% discount if it is paid for in 10 days.

The discount therefore is;

= 15,000 * 1%

= $150