Jason received an invoice for $5,000, and the invoice was dated on August 26 with terms of 2/10, n/45 EOM.
Please answer the following questions:
(1)
How much did Jason owe if the bill is paid by September 26?
(2)
When will be the last day that Jason can receive the cash discount?
(3)
When will be the last day that Jason has to pay for
To answer the questions, we need to understand the terms mentioned in the invoice:
1. 2/10: This means that if Jason pays the invoice within 10 days, he can take a 2% cash discount.
2. n/45: This indicates that the total amount is due within 45 days.
3. EOM: This stands for "End of Month," meaning the terms start counting from the end of the month in which the invoice was dated.
Now, let's answer the questions one by one:
(1) To determine how much Jason owes if the bill is paid by September 26, we need to consider the cash discount. Since Jason has 10 days to pay the invoice and receive a 2% discount, the net amount he'll owe after taking the discount would be 98% of the total amount. Therefore, the amount Jason owes after the discount is calculated as follows:
$5,000 * 0.98 = $4,900
Hence, if the bill is paid by September 26, Jason owes $4,900.
(2) To find out the last day Jason can receive the cash discount, we add the discount period (10 days) to the invoice date (August 26). By doing so, we get:
August 26 + 10 days = September 5
Therefore, the last day Jason can receive the cash discount is September 5.
(3) To determine the last day Jason has to pay for the invoice without incurring any late fees, we consider the total time allowed for payment, which is 45 days from the end of the month. As the invoice is dated on August 26 and the EOM (End of Month) convention is applied, we calculate:
August 26 + 45 days = October 10
Thus, the last day that Jason has to pay for the invoice without incurring any late fees is October 10.