Company B Purchased Merchandise Inventory With An Invoice Price Of $15,000 And Credit Terms Of 2/10, N/30. What Is The Net Cost Of The Goods If Company B Pays Within The Discount Period?
Net Cost of Goods Purchased: How to Calculate It and Record the Discount (With Journal Entries) When a business purchases inventory on credit, suppliers often offer an early payment discount. Understanding how to calculate the Net Cost of Goods (NCOG) and record the correct journal entries is essential for accounting students, business owners, and anyone preparing for accounting exams. Let's work through the example step by step. Question Invoice Price: $15,000 Credit Terms: 2/10, n/30 This means: The purchaser receives a 2% discount if payment is made within 10 days . Otherwise, the full invoice amount is due within 30 days . The question asks: What is the Net Cost of Goods (NCOG) if the purchaser pays within the discount period? Step 1: Calculate the Purchase Discount The purchase discount is calculated using the invoice price. Formula: Purchase Discount = Invoice Price × Discount Rate Calculation: Invoice Price = $15,000 Discount Rate = 2% Purchase Discount = $15,000 × 2% ...