A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 8, it paid the invoice. The amount of the cash paid on July 8 equals:

A) $200
B) $1,564.
C) $1,568
D) $1,600
E) $1,800

The correct answer is C

Explanation:

The amount of cash paid on July 8 is computed as:

Amount of goods worth = Purchased amount - Returned goods worth  Amount of goods worth = $1,800 - $200

Amount of goods worth  = $1,600

As the amount is paid within the terms of 10 days, so the amount is eligible for the discount of 2%, it is as:

Amount to be paid in cash = Amounts of goods worth - ( Amounts of goods worth × Discount)

where

Amounts of goods worth is $1,600

Discount is of 2%

Putting the values above:

Amount to be paid in cash = $1,600 - ($1,600 × 2%)

Amount to be paid in cash = $1,600 - 32

Amount to be paid in cash = $1,568

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