You are the accountant for suite dreams a retail furniture store recently an order of sofas and chairs was received from a manufacturer with terms of 3/15 n/45 the order amounted to $230,000 and suite dreams can borrow money at 13% ordinary interest how much can be saved by borrowing in the funds for 30 days to take advantage of the cash discount (remember suite dreams must borrows only the net amount due after the cash discount is taken)
The amount saved by borrowing the funds for 30 days to take advantage of the cash discount is $3,450. This is calculated by taking the cash discount of 3% ($6,900) and multiplying it by the ordinary interest rate of 13%.
