If Elkhorn Company purchased merchandise on account from Springhill Company for $42,000, terms 2/10, n/30. Elkhorn returned merchandise with an invoice amount of $8,000 and received full credit. a. If Elkhorn Company pays the invoice within the discount period, what the amount of cash required for the payment will be is: $33,320
First step is to calculate the net purchases using this formula
Net purchases=Net purchases- Purchase returns
Let plug in the formula
Net purchases=$42,000-$8,000
Net purchases=$34,000
Now let determine the cash payment using this formula
Cash payment=Net purchases-Purchase discounts
Let plug in the formula
Cash payment=$34,000-($34,000×2%)
Cash payment=$34,000-$680
Cash payment=$33,320
Inconclusion if Elkhorn Company purchased merchandise on account from Springhill Company for $42,000, terms 2/10, n/30. Elkhorn returned merchandise with an invoice amount of $8,000 and received full credit. a. If Elkhorn Company pays the invoice within the discount period, what the amount of cash required for the payment will be is: $33,320
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