Question

In: Accounting

Compute the amount to be paid for each of the four separate invoices assuming that all invoices are paid within the discount period.


QS 5-4 Computing net invoice amounts LO P1 

Compute the amount to be paid for each of the four separate invoices assuming that all invoices are paid within the discount period. 

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Solutions

Expert Solution

Explanation regarding the terms:

Generally, this concept is used when the buyers pay the money for goods which were taken on credit, much before the time period usually taken to pay, i.e. For eg: if condition is 1/10, n/20 it means that 1% discount shall be given if paid within 10 days out of the total credit period of 20 days.

Now, Keeping in mind the above, the questions can be solved as:

a) $ 9,200 Worth merchandise with terms of 2/10, n/60

Payment = Gross amount to be paid (-) Discount allowed by seller

= $ 9,200 (-) {$ 9,200 x 2%)

= $ 9,200 - $ 184

= $ 9,016

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b) $ 26,300 Worth merchandise with terms of 1/15, EOM (End of the month)

It means that 1% discount will be given if paid with in 15 days and the maximum credit period allowed shall be end of the month of sale

Payment = Gross amount to be paid (-) Discount allowed by seller

= $ 26,300 (-) {$ 26,300 x 1%}

= $ 26,300 - $ 263

= $ 26,037

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c) $ 83,400 Worth merchandise with terms of 1/10, n/30

Same case of (a) It means that 1% discount will be given if paid with in 10 days and the maximum credit period allowed shall 30 days

Payment = Gross amount to be paid (-) Discount allowed by seller

= $ 83,400 (-) {$ 83,400 x 1%}

= $ 83,400 - $ 834

= $ 82,566

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d) $ 20,500 Worth merchandise with terms of 3/15, n/45

It means that 3% discount will be given if paid with in 15 days and the maximum credit period allowed shall 45 days

Payment = Gross amount to be paid (-) Discount allowed by seller

=  $ 20,500 (-) { $ 20,500 x 3%}

=  $ 20,500 - $ 615

= $ 19,885

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