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Garden Company purchased merchandise on account from Parker Company for $88,000 with terms 1/15, net 45. Garden Company returned $12,000 of the merchandise and received full credit from Parker Company. If Garden Company pays within the discount period, what is the amount of cash required for payment?

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Answer:

The amount of cash required for payment is $75,240

Explanation:

The computation of cash required for payment is shown below:

= Purchase of merchandise - returned inventory - discount @1%

= $88,000 - $12,000 - $760

= $75,240

The discount is computed by

= Purchase of merchandise - returned inventory × discount rate

= $88,000 - $12,000 × 1%

= $76,000 × 1%

= $760

The actual amount is come when the returned inventory and discount amount should be deducted from the merchandise amount

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