Finney & Company purchased $1,800 of merchandise on 5/6. The terms were 2/15 EOM. The sneakers were received on 5/20, sent FOB Shipping Point. Freight charges amounted to $45. What payment must be made by that date to take advantage of the discount?
To determine the payment that must be made by the discount date, we first need to calculate the net amount of the merchandise purchase after deducting any eligible discounts.
1. Calculate the net purchase amount:
Merchandise Purchase = $1,800
2. Determine the discount terms:
Terms: 2/15 EOM
This means that a 2% discount is offered if the payment is made within 15 days from the end of the month (EOM) of the invoice date.
3. Identify the end of the month:
Invoice Date: 5/6
End of the month (EOM) of the invoice date: 5/31
4. Calculate the discounted amount:
Discounted amount = Merchandise Purchase x Discount Rate
Discounted amount = $1,800 x 2% = $36
5. Determine the net payment amount:
Net payment amount = Merchandise Purchase - Discounted amount
Net payment amount = $1,800 - $36 = $1,764
6. Consider the freight charges:
Freight Charges = $45
7. Add the freight charges to the net payment amount:
Total Payment Due = Net payment amount + Freight charges
Total Payment Due = $1,764 + $45 = $1,809
Therefore, the payment that must be made by the discount date to take advantage of the discount is $1,809.