The Empire Carpet Company orders merchandise for $14,486, including $475 in shipping charges, from Mohawk Carpet Mills on May 4. Carpets valued at $1,453 will be returned because they are damaged. The terms of sale are 2/10, n/30 ROG. The shipment arrives on May 26, and Empire wants to take advantage of the cash discount. As the bookkeeper for Empire, how much will you send to Mohawk? show step
To calculate the amount that Empire will send to Mohawk Carpet Mills, we need to consider a few factors.
Step 1: Determine the net purchase amount
The net purchase amount is the total purchase amount minus any returns or discounts. In this case, we need to subtract the value of the damaged carpets and any cash discounts.
Total Purchase Amount = $14,486
Damaged Carpets = $1,453
Net Purchase Amount = Total Purchase Amount - Damaged Carpets
Net Purchase Amount = $14,486 - $1,453
Net Purchase Amount = $13,033
Step 2: Calculate the cash discount
The terms of sale mentioned are 2/10, n/30 ROG. This means that a 2% cash discount is offered if payment is made within 10 days, with the total amount due within 30 days.
To calculate the cash discount, multiply the net purchase amount by the cash discount rate:
Cash Discount = Net Purchase Amount x Cash Discount Rate
Cash Discount = $13,033 x 0.02
Cash Discount = $260.66
Step 3: Calculate the amount to be paid
The amount to be paid is the net purchase amount minus the cash discount.
Amount to be Paid = Net Purchase Amount - Cash Discount
Amount to be Paid = $13,033 - $260.66
Amount to be Paid = $12,772.34
Therefore, as the bookkeeper for Empire, you will need to send $12,772.34 to Mohawk Carpet Mills.