Question

LUNC 13) A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company returned $275 worth of merchandise and then paid the invoice within the 2% cash discount period. The total cost of this merchandise is: A) $3,725.00. B) $3,925.00 D) $3,995.00. D) $4,000.50. E) $4,075.00. 14) A buyer of $7,000 in merchandise inventory failed to take advantage of the vendor's credit terms of 2/15, n/45, and instead paid the invoice in full at the end of 45 days. By not taking advantage of the cash discount, the buyer lost the discount of: A) $70. B) $1,050. C) $700. D) $100. E) $140. 13) Sales returns: (A) Refer to merchandise that customers return to the seller after the sale. B) Refer to reductions in the selling price of merchandise sold to customers. C) Represent cash discounts. D) Represent trade discounts. E) Are not recorded under the perpetual inventory system until the end of each accounting period.

number 14

Answer 1

Ans:14 The correct option for the answer is option E i.e. $140

The credit terms are 2/15 means that 2% discount is made within 15 days from the date of invoice:

Cash discount= Sales price*2%

=$7,000*2%

= $ 140

Therefore buyer lost the discount of $140