sa traders who use the perpetual inventory system, purchased merchandise on the 1 feb 2011 form africa limited for 500. the purchase was subject to a cash discount of 5% if settled within 20 days and a trade discount of 25%
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A retailer was given a trade discount of 15% and cash discount of 6% by the wholesaler. How much did the retailer pay for the good marked for 3745
To calculate the cost of the merchandise purchased by SA Traders using the perpetual inventory system, we need to consider the cash discount and trade discount given by Africa Limited.
Step 1: Calculate the trade discount.
The trade discount is given as 25% off the purchase price. So, to find the amount after the trade discount, we can multiply the purchase price by (1 - trade discount percentage).
Purchase price = 500
Trade discount = 25%
Amount after trade discount = Purchase price * (1 - Trade discount)
Amount after trade discount = 500 * (1 - 0.25)
Amount after trade discount = 500 * 0.75
Amount after trade discount = 375
Step 2: Calculate the cash discount.
The cash discount is given as 5% off the remaining amount (after trade discount) if settled within 20 days.
Remaining amount after trade discount = 375
Cash discount = 5%
Amount after cash discount = Remaining amount after trade discount * (1 - Cash discount)
Amount after cash discount = 375 * (1 - 0.05)
Amount after cash discount = 375 * 0.95
Amount after cash discount = 356.25
Therefore, the cost of the merchandise after considering the trade and cash discounts is $356.25.