To determine the amount that can be remitted to the head office from the branch, we need to analyze the information provided in the question step by step.
Given Information:
- Invoice par value: N 2,000
- Discount rate: 5%
Step 1: Calculate the Discount Amount
The first step is to calculate the discount amount based on the invoice par value. The discount is calculated as follows:
[
\text{Discount Amount} = \text{Invoice Par Value} \times \text{Discount Rate}
]
Substituting the values:
[
\text{Discount Amount} = N 2,000 \times 0.05 = N 100
]
Step 2: Calculate the Net Amount After Discount
Next, we need to find the net amount after applying the discount. This is done by subtracting the discount amount from the invoice par value:
[
\text{Net Amount} = \text{Invoice Par Value} - \text{Discount Amount}
]
Substituting the values:
[
\text{Net Amount} = N 2,000 - N 100 = N 1,900
]
Step 3: Determine the Amount Remitted to Head Office
Since the goods are invoiced to the branch at cost, the amount that can be remitted to the head office is the net amount calculated above, which is N 1,900.
Conclusion
Thus, the correct answer is
C. N 1,900.
Explanation of Other Options:
-
A. N 2,100: This option is incorrect because it does not account for the discount. It suggests that the branch would remit the full invoice amount without considering the discount, which is not accurate.
-
B. N 200: This option is incorrect as it seems to misinterpret the discount calculation. It does not represent any logical calculation based on the given data.
-
D. N 100: This option is also incorrect. It represents the discount amount itself, not the net amount that can be remitted to the head office.
Common Pitfalls:
- Ignoring the Discount: A common mistake is to overlook the discount when calculating the amount to be remitted. Always ensure to apply any discounts to arrive at the correct net amount.
- Misunderstanding Invoice Terms: Ensure clarity on whether the invoice amount is the gross amount or if it has already been adjusted for discounts.
Revision Summary:
- Calculate the discount by multiplying the invoice amount by the discount rate.
- Subtract the discount from the invoice amount to find the net amount.
- The net amount is what can be remitted to the head office.
- Always double-check calculations to avoid common errors related to discounts.