Accounting

Question

Bally Manufacturing sent Intel Corporation an invoice for machinery with a $14,000 list price. Bally dated the invoice July 23 with 2/10 EOM terms. Intel receives a 40% trade discount. Intel pays the invoice on August 5. On August 1, Intel Corporation returns $100 of the machinery due to defects. What does Intel pay Bally on August 5?

Answer 1

23 July invoice to Intel in the amount of $14,000

1 August Intel returns $100 of product - amount due Bally = $13,900

5 August, Intel pays the amount due BUT the payment was made beyond the 2/10 EOM term, so only the 40% trade discount will apply - amount paid = $13900 - (13900 x 0.4) = $8,340