Question

After the amount due on a sale of $181,825, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment. The cost of the merchandise returned was $81,821.

If required, round your answers to nearest whole value.

a. What is the amount of the refund owed to the customer?

Answer 1

Answer)

Calculation of amount of refund owed to customer

Amount of refund due = Cost of merchandise returned – (cost of merchandise returned X 2%)

                                         = $ 81,821 – ($ 81,821 X 2%)

                                         = $ 80,184.58 or $ 80,185 (rounded off)      

Therefore the amount of refund owed to customer is $ 80,185.

Goods worth $ 181,825 was originally sold to the customer. Since the payment was made within the discount period, discount of 2% was allowed to the customer.

The payment received from customer = $ 181,825 - ($ 181,825 X 2%)

                                                                       = $ 178,189.

However merchandise worth $ 80,185 was later returned to the seller. Since the seller received original payment (i.e. $ 178,189) net of discount of 2%, he will make payment of goods returned by the customer net of discount of 2%.