What payment should be made on an invoice in the amount of $3,400 dated August 7 if the terms of sale are 3/15, 2/30, n/45 and the bill is paid on August 19?
Lowery landscapes had net income of $50,000 for 2010. Land was sold for $40,000, of which #3,000 was a gain. The beginning cash balance was #53,000, and the ending cash balance was #252,000. Depreciation expenses were $11,000. Prepare a statement of cash flows for the year ended December 31, 2010, for Lowry Landscapes using the indirect method.
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To determine the payment that should be made on an invoice with terms of 3/15, 2/30, n/45, we need to understand what these terms mean and how they apply to the invoice.
The terms of sale 3/15, 2/30, n/45 are commonly referred to as "dating terms" or "discount terms" in business transactions. Let's break down what each number represents:
1. The first number (3) represents the discount percentage that can be deducted from the invoice amount if paid within a specified number of days. In this case, it's a 3% discount.
2. The second number (15) represents the number of days within which the discount can be claimed (also known as the discount period).
3. The third number (2) represents another discount percentage that can be claimed if payment is made within a longer period. In this case, it's a 2% discount.
4. The fourth number (30) represents the extended period within which the second discount can be claimed.
5. The variable 'n' represents the net period, which is the maximum number of days allowed for payment without any discount.
Now let's calculate the payment based on the given information:
1. The invoice is dated August 7.
2. The terms state 3/15, 2/30, n/45, so we need to determine which discount period applies based on the payment date.
Since the payment is being made on August 19, we count the number of days between the invoice date and payment date:
August 19 - August 7 = 12 days
Based on the given terms, if payment is made within 15 days (the 15 in 3/15), a 3% discount is applicable. Since the payment was made within this period, we can deduct 3% from the invoice amount.
$3,400 * 3% = $102 (discount amount)
The discounted invoice amount is:
$3,400 - $102 = $3,298
Therefore, the payment that should be made on the invoice is $3,298.