A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:
A) $8,924.
B) $9,700.
C) $10,000.
D) $9,800.
E) $8,724.

Question

Quizplus · Accepted Answer

The company initially purchased $10,000 of merchandise. After returning $800, the amount owed is $9,200. The terms 3/10, n/45 mean the company can take a 3% discount if it pays within 10 days. Since the company pays on June 24, within 10 days of the purchase (June 15), it can take a 3% discount on $9,200. The discount is $9,200 * 3% = $276. Therefore, the cash paid is $9,200 - $276 = $8,924.

A Company Purchased $10,000 of Merchandise on June 15 with Terms