Question

Appliances received an invoice dated January 14th with terms 2​/10 E.O.M. for the items listed below.

4 refrigerators at ​$950 each less ​20% and 4​%

3 dishwashers at ​$719 each less 16 1/3​%, 12.3​%, and 3​%

​(a) What is the last day for taking the cash​ discount? ​

(b) What is the amount due if the invoice is paid on the last day for taking the​ discount?

​(c) What is the amount of the cash discount if a partial payment is made such that a balance of ​$1,500 remains outstanding on the​ invoice?

Answer 1

2/10 E.O.M. payment terms means to convey that the buyer may deduct a 2% cash discount on the condition of making the payment by the 10th of the following month. In this case the the last day comes out to be 10th of February.

a) The last day to take cash discount is 10th of February.

b) Since the question is not clear for the discount whether the discount is successive discount or different discount rate for different piece.

Considering it as a Successive discount case, as otherwise it is not clear for calculation refrigerators

invoice price for refrigerator = = 2918.4

invoice price for dishwasher = =1529.4

Therefore, total invoice = 1529.4 + 2918.4 = 4447.5

Cash discount allowed = 2%

Final payment after deducting Cash Discount = 98% * 4447.5 = 4358.55

Therefore the final payment of $4358.55 needs to be made too the vendor by 10th february after deducting Cash discount.

c) amount outstanding = 1500

amount to be paid = 4447.5 - 1500 = 2947.5

amount of cash discount = 2% * 2947.5

= $58.95

Therefore cash discount received is $58.95