Swifty Corporation records purchases at net amounts. On May 5 Swifty purchased merchandise on account, $85000, terms 2/10, n/30. Swifty returned $5400 of the May 5 purchase and received credit on account. At May 31 the balance had not been paid. The amount to be recorded as a purchase return is $5400. $5508. $5292. $4860.

Question

Jeffrey Dunlap

Business

20 February, 21:25

Swifty Corporation records purchases at net amounts. On May 5 Swifty purchased merchandise on account, $85000, terms 2/10, n/30. Swifty returned $5400 of the May 5 purchase and received credit on account. At May 31 the balance had not been paid. The amount to be recorded as a purchase return is $5400. $5508. $5292. $4860.

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Spencer Hurley · Answer 1

Answer:$5400

Explanation:

In sales merchandise a seller can give a trade or a cash discount. A trade discount is giving based on the volume of sales, while a cash discount is giving to encourage prompt cash payment and it will be accorded the buyer once the conditions of payment is met.

The above scenario is a cash discount which means 2% cash discount will be giving if payment is made whithin 10 days and it should be made within 30 days. The amount of cash discount is there after deducted from the income statement as an expenses, though for the trade discount this is deducted directly to the sales journal.

Swift only return goods of $5400 and this is the amount to be recognized as purchase return.