After the amount due on a sale of $28,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment for a cash refund on March 1. The cost of the merchandise returned was $16,800.

Required:

(a) What is the amount of the refund owed to the customer?

(b)What is the amount of the refund owed to the customer?

The correct answer is $27,440.

Explanation:

According to the scenario, computation of the given data are as follow:-

Term 2/10, n/eom shows 2% percent discount

Discount on sale = $28,000 × 2÷100= $560

(a). We can calculate the account receivable turnover by using following formula:-

Cash refund owed to customer = Amount due on sale - Sales discount

By putting the value, we get

= $28,000 - $560

= $27,440

The amount of the refund owed to the customer is $27,440.

(b). This is same as part (a).

So the amount of the refund owed to the customer is $27,440.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23

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