10. Simms Trucking Company received an invoice showing 20 tires at $99.00 each, 16 tires at $120.00 each, and 12 tires at $150.00 each. Shipping terms are FOB shipping point. Freight is $350.00; trade discount is 12/4; and a cash discount of 2/10, n30 is offered. Assuming Simms paid within the discount period, what did Simms pay?
To calculate what Simms Trucking Company paid, we need to consider the cost of the tires, the shipping cost, the trade discount, and the cash discount.
Let's break down the calculation step by step:
1. Cost of the tires:
- 20 tires at $99.00 each: 20 * $99.00 = $1980.00
- 16 tires at $120.00 each: 16 * $120.00 = $1920.00
- 12 tires at $150.00 each: 12 * $150.00 = $1800.00
Total cost of the tires = $1980.00 + $1920.00 + $1800.00 = $5700.00
2. Shipping cost:
Shipping terms are FOB shipping point, which means Simms Trucking Company is responsible for the shipping costs. The invoice states that the freight is $350.00.
3. Trade discount:
The trade discount given is 12/4. This means that Simms Trucking Company can receive a 12% discount if they pay within 4 days.
To calculate the trade discount:
Trade discount = Total cost of the tires * trade discount rate
Trade discount = $5700.00 * 12% = $684.00
4. Cash discount:
The cash discount offered is 2/10, n30. This means that Simms Trucking Company can receive a 2% discount if they pay within 10 days. The invoice payment terms are net 30, meaning the total amount is due within 30 days.
To calculate the cash discount:
Cash discount = Total cost of the tires - Trade discount * Cash discount rate
Cash discount = $5700.00 - $684.00 * 2% = $5700.00 - $13.68 = $5686.32
Finally, subtract the cash discount from the total cost of the tires:
Total amount paid = Total cost of the tires - Cash discount
Total amount paid = $5700.00 - $5686.32 = $13.68
Simms Trucking Company paid $5686.32.