A company purchases merchandise from a wholesaler that has a list price of $20,000. The company receives a 35% trade discount from the supplier and credit terms of 2/10, n/30. Assuming no returns were made and that payment was made within the discount period, what is the net cost of the merchandise?
A)$13,720.
B)$19,600.
C)$6,860.
D)$13,000.
E)$12,740.

Question

Quizplus · Accepted Answer

Trade discount = List price x Trade discount rate
Trade discount = $20,000 x 0.35
Trade discount = $7,000

Net price = List price - Trade discount
Net price = $20,000 - $7,000
Net price = $13,000

If payment is made within the discount period, the company can take a 2% discount on the net price:
Discount = Net price x Discount rate
Discount = $13,000 x 0.02
Discount = $260

Net cost = Net price - Discount
Net cost = $13,000 - $260
Net cost = $12,740

Therefore, the answer is E: $12,740.

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