Question

The following transactions were selected from the records of Evergreen Company:

July 12 Sold merchandise to Wally Butler, who paid the $1,140 purchase with cash. The goods cost Evergreen Company $670.

16 Sold merchandise to Claudio’s Chair Company at a selling price of $5,140 on terms 3/10, n/30. The goods cost Evergreen Company $3,570.

19 Sold merchandise to Otto’s Ottomans at a selling price of $3,070 on terms 3/10, n/30. The goods cost Evergreen Company $1,970.

23 Received cash from Claudio’s Chair Company for the amount due from Jul-16.

31 Received cash from Otto’s Ottomans for the amount due from July Jul-19. Find the revenue for the month of ended july 31.

Find the Revenue for the month ended july 31

Answer 1

The question is trying to impart the basis for computation of revenue when there are terms of discount involved.

The sale made to Claudio's Chair is on the terms of 3/10, net 30 which means the company shall offer the discount of 3% if the payment is made within 10 days, given that in case of partial payment made within 10 days the whole payment should be made within 30 days.

Since, Claudio's Chair made the payment on 23/07 for the purchase  affected on 16/07, i/e within 10 days.
Similar terms were given to Otto’s Ottomans, but since they paid the amount after 10 days of the purchase date, no cash discount is offered to them.

This is a technique used by the seller to receive cash on time which enables smooth working capital management and reduces the risk of bad debts.

Customer	Date	Mode	Cash Receipt Date	Discount	Revenue	Cost	Profit
Wally Butler	12-07-2020	Cash	12-07-2020	0	1140.00	670.00	470.00
Claudio’s Chair Company	16-07-2020	Credit	23-07-2020	3%	4985.80	3570.00	1415.80
Otto’s Ottomans	19-07-2020	Credit	31-07-2020	0	3070.00	1970.00	1100.00
Total					9195.80	6210.00	2985.80