An invoice dated August 15 is paid on August 20 . The amount on the bill is $ 1,525 and the credit terms are 3 / 10 , n / 30. What amount should be paid?
(a)$ 1,325.00 (b)$ 1,425.00 (c)$ 1,479.25 (d)$ 1,495.00 (e)$ 1,525.00
I am having trouble figuring what formula i could use to solve this problem. Please help me out.
Since the invoice is paid within 10 days, the customer takes 3% off the amount on the bill.
1525 - (1525 * 0.03) = ?
$1,479.25
To determine the amount that should be paid, you need to consider the terms stated: 3/10, n/30. These are commonly known as credit terms, which indicate the discount and payment period.
In this case, the credit terms are as follows:
- A discount of 3% is given if paid within 10 days.
- The payment is due within 30 days (n represents any number is this scenario).
To calculate the amount that should be paid, you have two scenarios to consider:
1. Taking advantage of the discount:
If the invoice is paid within 10 days, you can deduct the discount from the total amount:
Discount = 3% of $1,525
Discount = (3/100) * $1,525
Discount = $45.75
Amount to be paid if the discount is taken = Total amount - Discount
Amount to be paid = $1,525 - $45.75
Amount to be paid = $1,479.25
2. Paying after the discount period:
If the invoice is paid after the discount period, you will have to pay the full amount of $1,525.
Given that the invoice was paid on August 20, which falls within the 10-day discount period, the amount to be paid is:
$1,479.25
Therefore, the correct answer is (c)$1,479.25.