Import exclusives Ltd. received an invoice dated June 28 from Dansk Specialties of Copenhagen with terms 5/20, n/45:
100 teak trays at $34.30 each;
25 teak ice buckets at $63.60 each;
40 teak salad bowls at $54.50 each.
All items are subject to trade discounts of 33 1/3%, 7 1/2%, 5%.
a) What is the last day of the discount period?
b) What is the amount due if the invoice is paid in full on July 15?
c) If a partial payment only is made on the last day of the discount period, what amount is due to reduce the outstanding balance to $2500?
I got 24.0792
a) To determine the last day of the discount period, we need to consider the term "5/20, n/45". This means that a cash discount of 5% is available if the invoice is paid within 20 days, otherwise, the full amount is due within 45 days.
If the invoice was dated on June 28, we need to add 20 days to find the last day of the discount period.
June 28 + 20 days = July 18
Therefore, the last day of the discount period is July 18.
b) To calculate the amount due if the invoice is paid in full on July 15, we need to take into account the trade discounts for each item.
For 100 teak trays at $34.30 each:
Discounted price = $34.30 - (33 1/3% of $34.30) = $22.87
Total cost for teak trays = 100 trays * $22.87/tray = $2,287
For 25 teak ice buckets at $63.60 each:
Discounted price = $63.60 - (7 1/2% of $63.60) = $58.91
Total cost for teak ice buckets = 25 buckets * $58.91/bucket = $1,472.75
For 40 teak salad bowls at $54.50 each:
Discounted price = $54.50 - (5% of $54.50) = $51.78
Total cost for teak salad bowls = 40 bowls * $51.78/bowl = $2,071.20
Total amount due on July 15 = $2,287 + $1,472.75 + $2,071.20 = $5,830.95
Therefore, the amount due if the invoice is paid in full on July 15 is $5,830.95.
c) To find the amount due to reduce the outstanding balance to $2500, we need to calculate the total outstanding balance and subtract $2500 from it.
Outstanding balance = total cost for teak trays + total cost for teak ice buckets + total cost for teak salad bowls
Outstanding balance = ($34.30 - (33 1/3% of $34.30)) * 100 trays + ($63.60 - (7 1/2% of $63.60)) * 25 buckets + ($54.50 - (5% of $54.50)) * 40 bowls
Outstanding balance = $2,287 + $1,472.75 + $2,071.20
Outstanding balance = $5,830.95
Amount due to reduce outstanding balance to $2500 = outstanding balance - $2500
Amount due = $5,830.95 - $2500
Amount due = $3,330.95
To answer these questions, we need to follow a step-by-step process:
Step 1: Calculate the discount period
The discount period is the number of days within which the buyer can avail of the discount. In this case, the terms state "5/20, n/45," which means a 5% discount is available if paid within the first 20 days. So, add 20 days to the invoice date of June 28.
Step 2: Calculate the last day of the discount period
Using Step 1, we add 20 days to the invoice date of June 28 to find the last day of the discount period.
Step 3: Calculate the amount due if the invoice is paid in full on July 15
To find the amount due on July 15, we need to calculate the total cost of all the items after applying the trade discounts. Then, we subtract the discount amount if paid within the discount period.
Step 4: Calculate the amount due to reduce the outstanding balance to $2500
First, calculate the total cost of all the items after applying the trade discounts. Then, find the remaining balance after deducting the partial payment made on the last day of the discount period. Finally, calculate the amount needed to reduce the remaining balance to $2500.
Let's apply these steps to answer each question:
a) What is the last day of the discount period?
To find the last day of the discount period, add 20 days to June 28:
June 28 + 20 days = July 18
Therefore, the last day of the discount period is July 18.
b) What is the amount due if the invoice is paid in full on July 15?
To calculate the amount due, we need to consider the cost of each item after applying the trade discounts. Then, deduct the discount amount if paid within the discount period.
100 teak trays at $34.30 each = $3,430
25 teak ice buckets at $63.60 each = $1,590
40 teak salad bowls at $54.50 each = $2,180
Total cost before trade discounts = $3,430 + $1,590 + $2,180 = $7,200
Now, apply the trade discounts one by one:
33 1/3% discount:
$7,200 - (33 1/3/100 * $7,200) = $4,800
7 1/2% discount:
$4,800 - (7 1/2/100 * $4,800) = $4,440
5% discount (discount within the first 20 days):
$4,440 - (5/100 * $4,440) = $4,218
Therefore, if the invoice is paid in full on July 15, the amount due is $4,218.
c) If a partial payment only is made on the last day of the discount period, what amount is due to reduce the outstanding balance to $2500?
Using the same calculations as in part b), the total cost of items after applying the trade discounts is $4,218.
Let's assume a partial payment of $X is made on the last day of the discount period. The remaining balance will be:
$4,218 - $X
We need to calculate the amount needed to reduce the remaining balance to $2500:
$4,218 - $X = $2500
Solving for $X, we have:
$X = $4,218 - $2500
$X = $1718
Therefore, to reduce the outstanding balance to $2500, a partial payment of $1718 is required.