On June 15, Oakley Inc. sells inventory on account to Sunglass Hut (SH) for $1,500, terms 3/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased for $400. On June 24, SH completely fulfills its obligation to Oakley by making a cash payment. What is the amount of cash paid by SH to Oakley?

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3 September, 08:51

On June 15, Oakley Inc. sells inventory on account to Sunglass Hut (SH) for $1,500, terms 3/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased for $400. On June 24, SH completely fulfills its obligation to Oakley by making a cash payment. What is the amount of cash paid by SH to Oakley?

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Erin · Answer 1

The amount of cash paid by SH to Oakley is $1067

Explanation:

The cash paid to Oakley will be for the amount due after Purchases return by SH and after availing the purchases discount.

The balance in Oakley's account after purchases return by SH on June 20 will be, 1500 - 400 = $1100

The payments terms allow a 3% discount if payment is made within 10 days of purchases. SH paid within the discount period thus it availed a discount of,

1100 * 0.03 = $33

The amount of cash paid by SH is = 1100 - 33 = $1067