A company purchases merchandise with a catalog price of $20,000. The company receives a 35% trade discount from the seller. The seller also offers credit terms of 2/10, n/30. Assuming no returns were made and that payment was made on time, what is the net cost of the merchandise?
A) $13,720.
B) $19,600.
C) $6,860.
D) $13,000.
E) $12,740.

Question

Quizplus · Accepted Answer

First, calculate the amount of trade discount: 
$20,000 x 35% = $7,000

Then, subtract the trade discount from the catalog price to get the net price: 
$20,000 - $7,000 = $13,000

Next, apply the credit terms: 
2/10 means a 2% discount is offered if payment is made within 10 days, 
n/30 means the full amount is due within 30 days

If the company pays within 10 days, they will receive a discount of: 
$13,000 x 2% = $260

So the net cost of the merchandise if paid within 10 days is: 
$13,000 - $260 = $12,740

Therefore, the best choice is E, with a net cost of $12,740.

A Company Purchases Merchandise with a Catalog Price of $20,000