City Cellular purchased $28,900 in cell phones on April 25. The terms of sale were 4/20, 3/30, n/60. Freight terms were F.O.B. destination. Returned goods amounted to $650. . If the manufacturer charges a 4 1/2 % late fee, how much would City Cellular owe if it did not pay the balance by the net date?
To determine how much City Cellular would owe if it did not pay the balance by the net date, we need to calculate the due date based on the terms of sale and then consider the late fee.
The terms of sale provided are 4/20, 3/30, n/60. This means that City Cellular has a discount of 4% if the balance is paid within 20 days of the invoice date, or they can pay the full amount within 30 days, with no discount. The net due date is 60 days after the invoice date.
First, let's find the net due date for payment. The invoice date is April 25. Adding 60 days to this will give us the net due date:
Invoice date + Net days = Net due date
April 25 + 60 days = June 24
So, the net due date is June 24.
Next, we need to determine if City Cellular qualifies for any discounts. Here are the available discount options based on the terms:
- 4% discount if the balance is paid within 20 days
- No discount if the balance is paid within 30 days
Since the net due date is June 24, we need to check if any of the discount periods fall before this date. If they do, City Cellular can take advantage of the discount.
- 4% discount within 20 days:
- Invoice date + Discount days = Discount due date
- April 25 + 20 days = May 15
Since May 15 is before June 24, City Cellular can take advantage of this discount.
Now, we need to calculate the balance owed after considering the returned goods and any applicable discounts.
The total purchase amount is $28,900. However, City Cellular returned goods worth $650. Therefore, the total balance to consider is:
Total purchase amount - Returned goods = Adjusted balance
$28,900 - $650 = $28,250
If City Cellular pays within the discount period, they will receive a 4% discount on $28,250. To calculate the discounted amount:
Adjusted balance - (Discount % * Adjusted balance) = Discounted amount
$28,250 - (0.04 * $28,250) = $27,140
So, if City Cellular pays within the discount period, the discounted amount owed would be $27,140.
Finally, if City Cellular does not pay by the net due date of June 24, a 4.5% late fee will be charged. To calculate the late fee amount:
Discounted amount + (Late fee % * Discounted amount) = Total amount owed
$27,140 + (0.045 * $27,140) = $28,285.10
Therefore, if City Cellular does not pay the balance by the net due date, they would owe $28,285.10 including the late fee.