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.
a. What is the net amount due if City Cellular sends the manufacturer a partial payment of $5,000 on May 20?
$
b. What is the net date?
Use the full name of the month (e.g., April).
c. If the manufacturer charges a 4 12% late fee, how much would City Cellular owe if it did not pay the balance by the net date?
$
To answer these questions, we need to calculate the net amount due and the net date, and then calculate the late fee if applicable. Here are the steps to find the answers:
Step 1: Calculate the net amount due if City Cellular sends a partial payment of $5,000 on May 20.
- Start with the original amount purchased: $28,900.
- Subtract the returned goods: $28,900 - $650 = $28,250.
- Subtract the partial payment: $28,250 - $5,000 = $23,250.
The net amount due is $23,250.
Step 2: Calculate the net date.
To calculate the net date, we need to determine the date when the payment is due considering the terms of sale.
- The terms of sale are 4/20, 3/30, n/60
- 4/20 means a 4% discount if the payment is made within 20 days.
- 3/30 means a 3% discount if the payment is made within 30 days.
- n/60 means the payment is due within 60 days.
- Start counting the due date from the invoice date, which is April 25.
- For the 4% discount within 20 days, calculate the due date: April 25 + 20 days = May 15.
- For the 3% discount within 30 days, calculate the due date: April 25 + 30 days = May 25.
- Since the payment is due within 60 days, the net date is May 25.
The net date is May 25.
Step 3: Calculate the late fee if the balance is not paid by the net date.
- The late fee is 4 12%.
- To calculate the late fee, we need to find the number of days beyond the net date (May 25) the payment is made.
- Let's assume we are calculating the late fee on June 15.
- Calculate the number of days beyond the net date: June 15 - May 25 = 21 days.
- Calculate the late fee amount: (4% + 12%) of the net amount due ($23,250).
- (4% + 12%) = 16%, which can be expressed as 0.16.
- Late fee amount = 0.16 * $23,250 = $3,720.
If the balance is not paid by the net date, City Cellular would owe an additional $3,720 in late fees.
So, the answers to the questions are:
a. The net amount due if City Cellular sends a partial payment of $5,000 on May 20 is $23,250.
b. The net date is May.
c. If the manufacturer charges a 4 12% late fee, City Cellular would owe $3,720 if the balance is not paid by the net date.
To determine the answers to the questions, we need to follow a few steps:
Step 1: Calculate the amount of the partial payment made on May 20 by subtracting it from the original purchase amount:
$28,900 − $5,000 = $23,900
Step 2: Determine the net amount due by considering the terms of sale:
The terms of sale are 4/20, 3/30, n/60. This means that if the payment is made within 4 days, a 4% discount applies, within 20 days, a 3% discount applies, and the full amount is due within 60 days.
Since the partial payment was made on May 20, which is 26 days after April 25, the 3% discount will apply. We can calculate this discount by multiplying the net amount due by 0.03 (3%):
$23,900 × 0.03 = $717
The net amount due after taking into account the discount is:
$23,900 − $717 = $23,183
Therefore, the net amount due if City Cellular sends the manufacturer a partial payment of $5,000 on May 20 is $23,183.
Step 3: Calculate the net date by adding the number of days stated in the terms of sale to the initial date (April 25):
April 25 + 20 days = May 15
The net date is May 15.
Step 4: Calculate the late fee if the balance is not paid by the net date:
The manufacturer charges a 4 12% late fee. To find out the late fee, we first need to calculate the total balance outstanding by subtracting the partial payment from the original purchase amount:
$28,900 − $5,000 = $23,900
To determine the late fee, we multiply the outstanding balance by the late fee percentage:
$23,900 × 0.0412 = $984.28
If the balance is not paid by the net date, City Cellular would owe $984.28 as a late fee in addition to the outstanding balance.
To summarize:
a. The net amount due if City Cellular sends the manufacturer a partial payment of $5,000 on May 20 is $23,183.
b. The net date is May 15.
c. If the manufacturer charges a 4 12% late fee, City Cellular would owe $984.28 if it did not pay the balance by the net date.