Question

On April 6, Year 1, Home Furnishings purchased $25,200 of merchandise from Una Imports, terms 2/10 n/45. On April 8, Home returned $2,400 of the merchandise to Una Imports for credit. Home paid cash for the merchandise on April 15, Year 1.
(a) What is the amount that Home must pay Una Imports on April 15?
(b) Record the events in a horizontal statement model.
(c) How much must Home pay for the merchandise purchased if the payment is not made until April 20, Year 1?

Answer 1

Answer:

A) $22,344

B) See explanation section

C) $22,800

Explanation:

Requirement A

The amount that Home must pay Una Imports on April 15 is -

Payment = Purchase amount - Purchase return - Purchase discount

2% Discount would receive only if Home Furnishings paid within 10 days.

As the company paid within 10 days, Home Furnishings received 2% discount.

Given,

Purchase amount = $25,200

Purchase (Inventory) return = $2,400

Purchase discount = $(25,200 - 2,400) × 2% = $456

Therefore,

Payment made by Home Furnishing = $25,200 - $2,400 - $456 = $22,344

Requirement B

See the image below.

Requirement C

April 6 to April 20 = 15 days.

The term says that, 2/10, n/45 means if Home furnishing would receive a 2% discount if they managed to pay within 10 days, however, they should pay the balance within 45 days.

As Home furnishing failed to pay within 10 days, but paid within 45 days, the company did not receive the discount of $456 (2% discount after deducting the returned inventory). They have to pay $25,200 - $2,400 = $22,800.