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Cash Discounts and Purchase Returns On April 6, 2018, Home Furnishings purchased $25,200 of merchandise from Unas Imports, t

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Answer #1
a)
Total purchase value of merchandise $25,200
Less: Cost of merchandise returned ($2,400)
Amount to be payable $22,800
Less: Discount value for paying withing the discount period ($22,800*2/100) ($456)
Amount that Home Furnishings must pay on April 15 $22,344
b)
Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
Cash + Inv. = Accts. Pay. C. Stock + Ret. Earn.
+. $25,200 +. $25,200
-. $2,400 -. $2,400
-. $456 +. $456 +. $456
-. $22,344 -. $22,344 -. $22,344
c)
Total purchase value of merchandise $25,200
Less: Cost of merchandise returned ($2,400)
Amount to be payable $22,800
$22,800 should be paid by Home Furnishings, if the payment is not made until April 20, 2018 because discount period ends on April 15 for 2% discount. If any payment is made after April, discount is not applicable, thus, full payment needs to be paid.
d)
Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow
Cash + Inv. = Accts. Pay. C. Stock + Ret. Earn.
-. $22,800 -. $22,800 -. $22,800
e) The terms 2/10 means that if the payment is made within 10 days from the date of April 6th then 2% discount is allowed but if the payment is made after April 15 which is 10 days from April 6th, then discount is not allowed. In order to avail the 2% discount, Home Furnishings wanted to pay on April 15.
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