Answered: Jack purchased merchandise with a list…

Jack purchased merchandise with a list price of $156,000 and is offered a trade discount of 20% and terms of sale of 3/10, n30. He makes a $55,000 partial payment on day 8.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 11RE

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Question

Find the outstanding balance.

Jack purchased merchandise with a list price of $156,000 and is offered a trade discount of 20% and terms of sale of 3/10, n30. He makes a $55,000 partial payment on day 8.

Expert Solution

Step 1 Introduction

Trade Discount :— It is the discount allowed on the list price of goods by the supplier at the time of purchase.

Cash Discount :— It is the reduction in the purchase price of goods for receiving payment before due date.

Sales term of 3/10, n/30 :— It means 3 % discount is allowed when payment is made within 10 days, otherwise pay the full amount within 30 days without any discount.

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