On August 18, Sullivan Company received an invoice in the amount of $6,700, having terms of sale of 4/15 EOM. What is the discount date?
To determine the discount date for a sales invoice with terms of sale stated as "4/15 EOM," you need to understand what these terms mean.
"4/15" indicates that a 4% discount is allowed if the invoice is paid within 15 days.
"EOM" stands for "end of the month." So, the number of days in the terms starts counting from the end of the month in which the invoice was issued.
To find the discount date:
1. Determine the invoice date: In this case, it is August 18th.
2. Add 15 days to the invoice date: August 18th + 15 days = September 2nd.
3. Identify the end of the month following the month of the invoice date: In this case, the month following August is September.
4. Locate the last day of the following month (September): September 30th.
5. If the calculated discount date (September 2nd) falls on or before the last day of the next month (September 30th), then it becomes the discount date. Otherwise, the discount date will be the last day of the next month.
In this scenario, the discount date would be September 2nd since it falls before the last day of the following month.