A retailer received an invoice dated 21 February 2015 worth $4,350 of goods that included a prepaid freight cost of $30. The invoice was offered trade discounts of 8% and 5% and cash discount term of 4/15, 2/20, n/30.
(a) Find the last date to settle the invoice.
(b) Assume that the retailer paid $400 on 7 March 2015 and the balance on 14 March 2015. Find the amount of the balance that was paid.
To answer these questions, we need to break down the information provided and follow a step-by-step process.
(a) Finding the last date to settle the invoice:
Step 1: Calculate the trade discounts:
First trade discount of 8%:
$4,350 * 8% = $348
Subtracting the first trade discount from the total:
$4,350 - $348 = $4,002
Second trade discount of 5%:
$4,002 * 5% = $200.10
Subtracting the second trade discount from the total:
$4,002 - $200.10 = $3,801.90
Step 2: Calculate the net amount:
Net amount is the total invoice amount minus the sum of all trade discounts:
Net amount = $3,801.90
Step 3: Calculate the credit period with cash discount terms:
Given cash discount terms: 4/15, 2/20, n/30
This means that the retailer can take a 4% cash discount if the invoice is paid within 15 days, a 2% cash discount if paid within 20 days, or the full amount is due within 30 days.
To find the last date to settle the invoice, we need to calculate the total credit period:
30 days - 15 days = 15 days
Therefore, the last date to settle the invoice is 15 days from the invoice date, which is:
21 February 2015 + 15 days = 8 March 2015
(a) The last date to settle the invoice is 8 March 2015.
(b) Finding the amount of the balance that was paid:
Given payment details:
$400 paid on 7 March 2015
Balance paid on 14 March 2015
Step 1: Calculate the remaining balance:
The remaining balance is the net amount minus the partial payment:
Remaining balance = Net amount - $400
Step 2: Calculate the amount of the balance paid:
Amount of the balance paid = Remaining balance - (Net amount * 2%)
Please note that the 2% cash discount should be calculated based on the net amount, not the total invoice amount.
(b) To determine the amount of the balance paid, you would need the remaining balance and calculate it based on the given information about the cash discount term and partial payment.
I hope this helps break down the problem and guide you through solving it step by step.