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.

$4484.08

To calculate how much can be saved by borrowing the funds for 30 days to take advantage of the cash discount, we need to follow a few steps:

Step 1: Determine the net amount due after the cash discount.
The terms of 3/15, n/45 mean that the supplier offers a 3% cash discount if payment is made within 15 days. Therefore, to determine the net amount due, we need to subtract the cash discount from the total order amount.

Cash discount = Total order amount * Cash discount rate
Cash discount = $230,000 * 3% = $6,900

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

Step 2: Calculate the interest cost of borrowing the net amount due.
Since Suite Dreams will need to borrow the net amount due for 30 days, we can calculate the interest cost using the formula:

Interest = Principal * Interest rate * Time
Interest = $223,100 * 13% * (30/365) ≈ $2,303

Therefore, Suite Dreams will incur an interest cost of approximately $2,303 by borrowing the net amount due for 30 days.

Step 3: Calculate the savings by comparing the cash discount with the interest cost.
To determine the savings, we need to find the difference between the cash discount and the interest cost.

Savings = Cash discount - Interest cost
Savings = $6,900 - $2,303 = $4,597

Therefore, Suite Dreams can save approximately $4,597 by borrowing the funds for 30 days to take advantage of the cash discount.