A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 14, it paid the full amount due. The amount of the cash paid on July 14 equals:
A)$200.
B)$1,564.
C)$1,568.
D)$1,600.
E)$1,800.

Question

Quizplus · Accepted Answer

The company has two options for paying the amount due:

Option 1: Pay within 10 days and receive a 2% discount.
Option 2: Pay within 30 days and pay the full $1,800 amount.

Since the company paid on July 14, which is 9 days after the purchase date, they are still within the 10-day discount period. Therefore, they can take advantage of the discount and pay 98% of the amount due:

$1,800 - ($1,800 * 0.02) = $1,764

However, the company returned $200 worth of merchandise, so the final amount due is:

$1,764 - $200 = $1,564

Therefore, the amount of cash paid on July 14 is $1,564.

A Company Purchased $1,800 of Merchandise on July 5 with Terms