Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

If Molly purchases merchandise with a list price of $12,000 and is offered a trade discount of 10% and a cash discount of 2/10, n/30, what will be the net sales amount recorded by the seller if Molly pays within the discount period?

$11,760

$10,800

$12,000

$10,584

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Verified step by step guidance

Step 1: Understand the trade discount. A trade discount is a reduction in the list price offered by the seller. Calculate the trade discount amount by multiplying the list price ($12,000) by the trade discount rate (10%). Use the formula: Trade Discount = List Price × Trade Discount Rate.

Step 2: Subtract the trade discount amount from the list price to determine the discounted price. Use the formula: Discounted Price = List Price - Trade Discount.

Step 3: Understand the cash discount terms '2/10, n/30'. This means a 2% cash discount is available if payment is made within 10 days; otherwise, the full amount is due within 30 days. Since Molly pays within the discount period, calculate the cash discount amount by multiplying the discounted price (from Step 2) by the cash discount rate (2%). Use the formula: Cash Discount = Discounted Price × Cash Discount Rate.

Step 4: Subtract the cash discount amount from the discounted price to determine the net sales amount recorded by the seller. Use the formula: Net Sales Amount = Discounted Price - Cash Discount.

Step 5: Verify the calculation process by ensuring each step logically follows the previous one and aligns with the problem's requirements. The net sales amount recorded by the seller is the final value after applying both discounts.