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Purchase-related transactions A retailer is considering the purchase of 1,000 units of a specific item from either of two suppliers. Their offers are as follows: Supplier One: $34.80 a unit, 1/10, n/30, no charge for freight. Supplier Two: $35.00 a unit, 2/10, n/30, plus freight of $200. Which of the two offers, Supplier One or Supplier Two, yields the lower price?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 5, Problem 5E
Textbook Problem
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Purchase-related transactions

A retailer is considering the purchase of 1,000 units of a specific item from either of two suppliers. Their offers are as follows:

Supplier One: $34.80 a unit, 1/10, n/30, no charge for freight.

Supplier Two: $35.00 a unit, 2/10, n/30, plus freight of $200.

Which of the two offers, Supplier One or Supplier Two, yields the lower price?

To determine

Find which supplier yields the lower price.

Explanation of Solution

Purchases is an activity of acquiring the merchandise inventory of a business.

The following table shows the final price of two offers.

ParticularsSupplier OneSupplier Two
Amount ($)Amount ($)
List Price34,80035,000
Less: Discount(348)(700)
Price After Discount34,45234,300
Add: Freight Charges0200
Final Price34,45234,500

Table (1)

Working Notes:

For Supplier one:

List Price = ($34.80×1,000 units) $34,800.

Calculate the amount of discount for Supplier One

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Chapter 5 Solutions

Financial And Managerial Accounting
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