Question

Assume Bella Donna’s General Store bought, on credit, a truckload of merchandise from American Wholesaling costing $1,610. The company paid $104 in transportation cost to National Trucking to deliver the merchandise to Bella Donna. Bella Donna immediately returned goods to American Wholesaling costing $540, and then took advantage of American Wholesaling’s 1/10, n/30 purchase discount. When Bella Donna pays American Wholesale within the discount period, the debit to accounts payable will be $______.

Answer 1

Bella Donna purchased merchandise on account from American whole selling for $1,610, terms 1/10, n/30. Bella Donna returned $540 of the merchandise and received full credit.

This means that a buyer may take a 1% cash discount on the invoice price less any returns or allowances, if payment is made within 10 days of the invoice date (the discount period). If the buyer does not pay in that time, the invoice price, less any returns or allowances, is due 30 days from the invoice date.

Final amount due = Cost of goods purchased - Cost of goods returned

= 1,610 - 540

= 1,070

Discount amount = Final amount due x Discount percentage

= 1,070 x 1/100

= $10.70

Cash payment to be made = Final amount due - Discount amount

= 1,070 - 10.70

= $1,059.30

Hence, When Bella Donna pays American Wholesale within the discount period, the debit to accounts payable will be $1,059.30

Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubts. Thanks.