Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $35,000.The seller issued a credit memorandum for $8,000 prior to payment.What is the amount of the cash discount allowable?

Question

Quizplus · Accepted Answer

2/10, n/30 means the customer can take a 2% discount if they pay within 10 days, otherwise the full amount is due within 30 days.
FOB shipping point means the ownership and responsibility of the merchandise passes to the customer when it leaves the seller's shipping dock.
The selling price of $35,000 is not relevant in calculating the cash discount allowable.
The credit memorandum for $8,000 means that the customer will only owe $27,000 ($35,000 - $8,000) which is eligible for the cash discount.
The cash discount allowable is 2% of $27,000 which equals $540.

Merchandise Subject to Terms 2/10, N/30, FOB Shipping Point, Is