Diane's Pottery Shop orders china from a supplier for $240 including $30 freight charges. The terms of sale are 3/10, n/30 ROG. The china arrives on 11/21 and Diane wants to take advantage of the cash discount.
As the bookkeeper for Diane's how much will you send the supplier?
To calculate the amount that will be sent to the supplier in order to take advantage of the cash discount, we need to break down the information provided step-by-step.
1. Determine the cost of the china without the freight charges: Since the total cost of the order, including freight charges, is $240, and the freight charges are $30, we subtract the freight charges from the total cost:
Total cost - Freight charges = Cost of the china
$240 - $30 = $210
2. Identify the terms of sale: The terms of sale provided are 3/10, n/30 ROG.
- 3/10 represents a cash discount percentage of 3% given if paid within 10 days.
- n/30 represents that the full payment is due within 30 days from the receipt of goods (ROG).
3. Determine the cash discount amount: Multiply the cost of the china by the cash discount percentage:
Cash discount amount = Cost of the china * Cash discount percentage
Cash discount amount = $210 * 0.03 = $6.30
4. Calculate the payment amount: Subtract the cash discount amount from the cost of the china:
Payment amount = Cost of the china - Cash discount amount
Payment amount = $210 - $6.30 = $203.70
Therefore, as the bookkeeper for Diane's Pottery Shop, you would send the supplier a payment of $203.70 to take advantage of the cash discount.