In: Accounting
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.
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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