Answered: Kiddie Kites buys Japanese kite kits…

Kiddie Kites buys Japanese kite kits with a list price of $8,500. If the supplier offers trade discounts of 30/15/15, find the trade discount amount to the nearest cent.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 11RE

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Question

Kiddie Kites buys Japanese kite kits with a list price of $8,500. If the supplier offers trade discounts of 30/15/15, find the trade discount amount to the nearest cent.

$2,868.75

$4,201.13

$4,298.88

$5,631.25

Expert Solution

Step 1

Supplier offers trade discounts of 30/15/15, which means first supplier will give 30% discount on the list price, then give 15% discount and then again 15% on discounted price.

Therefore, Price after discount would be:

Price after discount = $8,500 x (1-30%) x (1-15%) x (1-15%)

= $4,298.87

Trade discount amount = List price - Price after discount

= $8,500 - $4,298.87

= $4,201.13

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