A company purchases inventory on account with terms of 210 n

A company purchases inventory on account with terms of 2/10, n30, and is invoiced $20,000. Two days after it receives the goods, management realizes there are defective units and return $3,000 worth of the inventory. Another 2 days later, the company pays the entire balance due. After considering each event herein, calculate the cost of the inventory.

Solution

2/10 net 30 means if you had paid the entire billed amt. within 10 days you will a 2% discount .

so total invoiced amt. = $20000

defective unit and return amt. = 3000

so total amt. of goods purchased = 17000

now the company pays entire amt. so he will pay to his creditor = 17000 - 17000*2/100

= 17000 - 340

= 16660

so the cost of inventory = 16660

Please note all values are in $ and comment if in case of any clarification required.