A man buys a 78$ necklace at a jewelry store and he gives the jeweler a check for 100$. Because the jeweler does not have the $22 change on hand, she goes to another merchant next door. There she exchanges the man’s check for 100$ in cash. She returns to her store and gives the man the necklace and the change.
Later the check is returned by the bank due to insufficient funds in the buyer’s account and the jeweler must then give the other merchant $100. The jeweler originally paid $39 for the necklace.
What is the jeweler’s total loss?
39?
100 +39 +22 =161
39 + 100.
Cost of the necklace + money reimbursed to the merchant.
All 3 answers are wrong.
cost of necklace = 39
profit when sold (@78) = 39
change to buyer = 22
money to other merchant = 100
total (including loss of profit) = 39+39+22+100 = 200/=
total (without loss of profit) = 39+22+100 = 161/=
if this is a trick question then the money charged by the bank for bounced check needs to be added to the loss 🙁
Not a trick question. Simple maths.
Both totals listed by jaideep are wrong.
139 + check return fee
There is no “return fee”. its not a trick question.
22 + 39 = 61
Mita gets a prize. 🙂
Can you also post the rationale behind why the 100/- that had to be paid to the other merchant is not part of the loss?
That 100$ is just the 100$ being returned back. Remember the merchant got 100$ in cash in return for the 100$ check.
Assume an empty wallet (of the merchant) with 0$ and track the inflow and outflow from wallet.
1) -39$ Outflow -> pay to buy necklace.
2) +100$ Inflow -> cash obtained by exchanging the check
3) -22$ Outflow -> pay change to customer
4) -100$ Outflow -> need to return 100$ for returned check
Total: -61$
I am going through one of those rare Ah-Ha moments 🙂
Thanks.
If Urmi were to look at this she would say “What about the lost opportunity cost ? That would be 22 + 39 + (78 – 39) = 100”. These auditors have to deal with these weird non-tangible costs to clear the books. You all can surely imagine the tough time I must be having explaining grocery bills.