You are the accountant for Suite Dreams, a retail furniture store. Recently, an order of sofas and chairs was received from the manufacturer with terms of 3/15, n/45. The order amounted to $230,000, and Suite Dreams can borrow money at 13% ordinary interest.

How much can be saved by borrowing the funds for 30 days to take advantage of the cash discount? (Remember, Suite Dreams must borrow only the net amount due after the cash discount is taken.)

I'm having trouble solving this one. Can anyone point me in the right direction?

To determine the cash discount and how much can be saved by borrowing the funds for 30 days, you will need to follow these steps:

Step 1: Calculate the cash discount:
The terms 3/15, n/45 mean that if Suite Dreams pays within 15 days, they can take a 3% cash discount. Therefore, the cash discount amount is calculated as 3% of the total order amount of $230,000:

Cash discount = 3% of $230,000
Cash discount = $230,000 * 0.03
Cash discount = $6,900

Step 2: Calculate the net amount due:
The net amount due is the total order amount minus the cash discount. So, the net amount due after the cash discount is:

Net amount due = Total order amount - Cash discount
Net amount due = $230,000 - $6,900
Net amount due = $223,100

Step 3: Calculate the cost of borrowing for 30 days:
To find the cost of borrowing the funds for 30 days, you need to calculate the interest payable on the net amount due for borrowing money at a 13% ordinary interest rate for 30 days. The interest calculation is based on the ordinary interest formula:

Interest payable = Principal * Interest rate * Time
Principal = Net amount due = $223,100
Interest rate = 13% / 365 (convert annual rate to a daily rate)
Time = 30 days

Interest payable = $223,100 * (0.13/365) * 30

Step 4: Calculate the total payment if not taking the cash discount:
The total payment to the manufacturer if Suite Dreams decides not to take the cash discount would be the net amount due plus the cost of borrowing:

Total payment = Net amount due + Interest payable

Step 5: Calculate the savings by taking the cash discount:
Finally, to calculate the savings by taking the cash discount, subtract the total payment with the cash discount from the total payment without the cash discount:

Savings = Total payment without cash discount - Total payment with cash discount

By following these steps, you should be able to calculate the amount that can be saved by borrowing the funds for 30 days to take advantage of the cash discount.