[Anonymous]

Becker Question –

If anyone can help me understand this it would be greatly appreciated. (And I thought after reading the question it would be extremely easy)

On June 1, Pitt Corp. sold merchandise with a list price of $5,000 to Burr on account. Pitt allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made FOB shipping point. Pitt prepaid $200 of delivery costs for Burr as an accommodation. On June 12, Pitt received from Burr a remittance in full payment amounting to:

$2,944 is the correct answer.

The explanation:

Cost of merchandise sold
$5,000
Trade discount %
30%
Trade discount amount
$1,500
Balance
3,500

---

$3,500
20%
Trade discount amount
$700
Balance
2,800

---

2,800
Cash discount %
2%
Cash discount
$56
Balance
2,744

---

Add: Loan of delivery cost
200
Expected remittance
$2,944

 

 

[mcarras]

The key to this is to take the two large discounts first. Then, take the 2% discount based on the amount after the first two discounts. That leaves a sum of $2,744. The remittance is for the accomodation. That is what makes the cost $2,944.

To Summarize:

Start $5,000

($1,000) 20% Discount

($1,200) 30 % Discount

$2,800 Amount before trade discount

($56) 2% trade Discount

#2,744 Amount before remittance

$200 Remittance from accomodation

$2,944. Final Amount.

[mcarras]

The key to this is to take the two large discounts first. Then, take the 2% discount based on the amount after the first two discounts. That leaves a sum of $2,744. The remittance is for the accomodation. That is what makes the cost $2,944.

To Summarize:

Start $5,000

($1,000) 20% Discount

($1,200) 30 % Discount

$2,800 Amount before trade discount

($56) 2% trade Discount

#2,744 Amount before remittance

$200 Remittance from accomodation

$2,944. Final Amount.

[Zackrampage]

Thanks mcarras I hope ill remember that process as well!

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[Zackrampage]

Thanks mcarras I hope ill remember that process as well!

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[FAR Study Group MCQ’s]

FYI→ Pitt Corp. sold merchandise with a list price of $5,000 to Burr on account
FOB shipping point = The goods were shipped FOB shipping point. Therefore, title transferred to Burr at the shipping point, meaning Burr pays for the shipping charges.
Follow the Steps:
Step# 1: Firs findout how to the trade discounts will be
20% → 5,000 * 20% = 1,000 => 5,000 – 1,000 = 4,000
30%–> => 4,000 * 30% = 1,200
5,000 – 1,000 – 1,200 = 2,800
Step# 2: Now we are appling the 2% because they paid it on time. ( 2/15, meaning if you pay in 15 days you will get additional of 2%).
2,800 * 2% = 56 ( cash discount )

Step# 3: Now we have to subtact it from the 2800 the 56 because its a discount.
2,800 – 56 = 2,744 ( Balance after applying the 2% discount for paying it on time ).
Step# 4: Now we have to add back the $200 because the customer is responsible for the shipping its FOB Shipping point
2,744 + 200 = 2,944 ( Expected remittance )

A remittance = refers to a specific payment that is made to satisfy a particular demand

[Author]

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