Chuck’s chops, an upscale steak house, received an invoice for 800 pounds of baking potatoes with a cost of $.85 per pound. the terms are 2 ½ /10, n/30. chuck was unable to pay the bill in full within the discount period but was able to remit a partial payment of $575.00 within the discount period. how much credit did chuck receive for his partial payment?

Chuck receive $589.74 for his partial payment

Explanation:

Let's begin by doing the definition of each concept:

invoice: commercial document which indicates the products, quantities, and prices in a transaction. It is issued duplicate by the seller, who keeps the duplicate, to the buyer, who retains the original.

commercial terms:

2 1/2 /10  the first term is a discount so it will be 2.5%

               the second term refers to the ammount of days this discount will be available. In this case during the first 10 days of the sales.

n/30  n refers to nominal ammount, this means no discount will be apply

         here the second term stay also the ammount of days this condition will apply, after 30 days the sale will generate interest.

800 pounts x $.85 each equals to $680

partial payment of $575

if there is a 2.5% discount this means the 575 represent the 1 - 0.025 of the nominal

so $575 payment after discount  --> .975

                          nominal               - ->  1

Doing the cross-multiply you get  $575/0.975 = $589.74

so resuming the formula will be:

Chuck receive a credit of $589.74 for his partial payment

The entry In Chuck Accounting will be

Account Payable 589.74 debit

Purchase Discount                           14.74  credit

Cash                                                575       credit

The seller will do the entry like this:

Cash                       575 debit

Sales Discount       14.74 debit

    Account receivable (CHUCK)     589.74 credit

That's why the question state that Chuck is receiving a credit, because it is the other company which acept the payment and perform this discount