Chloe’s Clothing Importers sells clothing with credit terms of 3/15, n/30. A trade discount of 30% is given to purchases made by wholesalers. On 6 September 2016, Kingsbury Wholesalers purchased clothing with a list price of $176 000 from Chloe’s Clothing Importers. The clothes had cost the business $80 000 to import from Thailand. Ignore GST.

Required

A. Determine the amount of the trade discount given to Kingsbury Wholesalers.

B. Assume that Kingsbury Wholesalers returned clothing with an original list price of $2640, and a cost of $1200. What source documents would be used by each business to note the transaction? Prepare journal entries to record the return in the accounting records of both entities.

C. What is the discount period? If Kingsbury Wholesalers pays on the last day of the discount period, how much is the sales discount recorded by Chloe’s Clothing Importers? (Don’t forget the return.) Record the journal entry made by both entities.

D. If Kingsbury Wholesalers does not pay within the discount period, when is the net amount due? What would be the effective annual interest rate assuming that Kingsbury Wholesalers pays on the day the net amount is due?