Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $20,000. The seller issued a credit memorandum for $5,000 prior to payment. What is the amount of the cash discount allowable?

Question

Quizplus · Accepted Answer

The credit memorandum reduced the amount owed by the customer to $15,000 ($20,000 - $5,000). 
The terms are 1/10, n/30, which means the customer can take a 1% discount if they pay within 10 days, or they can pay the full amount within 30 days. 
Therefore, the cash discount allowable is 1% of $15,000, which is $150 (Option B).

Merchandise Subject to Terms 1/10, N/30, FOB Shipping Point, Is