You work in the accounts receivable department and have just received a cheque for $2400 from a customer. On checking the records you find that you billed this customer for $5000 fifteen days ago. Your company's terms are 4/10, 3/20, n/60. After posting this receivable to the customer's account, determine how much they still owe.
To determine how much the customer still owes after receiving the cheque, we need to calculate the applicable discounts and subtract them from the original billed amount.
Let's break down the terms provided:
4/10: This means that the customer can take a 4% discount if they pay within 10 days of the invoice date.
3/20: This means that the customer can take a 3% discount if they pay within 20 days of the invoice date.
n/60: This means that the full amount is due within 60 days, without any discount.
First, we need to determine if the customer qualifies for any discount based on the number of days they have taken to make the payment. In this case, the cheque was received 15 days after the billing date.
Since the customer paid within 10 days, they are eligible for the 4% discount.
To calculate the discount amount, we'll multiply the billed amount by the discount percentage:
Discount amount for 4%: $5000 * 0.04 = $200
Subtracting the discount amount from the billed amount gives us the discounted amount:
Discounted amount: $5000 - $200 = $4800
Next, we need to determine if the customer took advantage of any early payment discount with the cheque they sent, which was received 15 days after the billing date.
Since the cheque was received within 20 days, they are eligible for the 3% discount.
To calculate the discount amount, we'll multiply the discounted amount by the discount percentage:
Discount amount for 3%: $4800 * 0.03 = $144
Subtracting the discount amount from the discounted amount gives us the final amount the customer owes:
Final amount: $4800 - $144 = $4656
Therefore, the customer still owes $4656 after posting the receivable to their account.