City Cellular purchased $28,900 in cell phones on April 25. The terms of sale were 4/20, 3/30, n/60. Freight terms were F.O.B. destination. Returned goods amounted to $650. What is the net amount due if City Cellular sends the manufacturer a partial payment of $5,000 on May 20? (Points : 2.5)
If the manufacturer from the question above charges a 4½% late fee, how much would City Cellular owe if it did not pay the balance by the net date? (Points : 2.5)
To calculate the net amount due, we need to subtract the amount of the partial payment made on May 20 from the total amount of the purchase.
First, let's break down the terms of sale:
4/20 means a 4% discount if paid within 20 days of the invoice date.
3/30 means a 3% discount if paid within 30 days of the invoice date.
n/60 means full payment is due within 60 days of the invoice date (no discount is applicable).
Given that the purchase was made on April 25, we can start calculating the due dates for each discount period:
- The first discount period (4/20) would be from April 25 to May 15.
- The second discount period (3/30) would be from April 25 to May 25.
- The full payment due date would be June 24.
To calculate the net amount due on May 20, we need to apply any applicable discounts to the purchase amount. Let's break it down step by step:
1. Calculate the purchase with the 4% discount:
$28,900 * (1 - 0.04) = $27,744
2. Calculate the purchase with the 3% discount:
$28,900 * (1 - 0.03) = $28,033
3. Determine the due amount if no discount is taken:
$28,900
Now, let's calculate the net amount due on May 20 after the partial payment of $5,000:
1. Subtract the partial payment from the purchase amount:
$28,900 - $5,000 = $23,900
So, the net amount due on May 20 is $23,900.
Moving on to the second part of the question regarding the late fee, we'll need to apply the 4½% late fee to the outstanding balance after the net payment date.
1. Determine the days past the net date (June 24) – assuming the full payment hasn't been made.
Let's say today's date is July 1, which would be 7 days past the net date.
2. Calculate the late fee:
Late fee = Outstanding balance * late fee percentage
Outstanding balance = $23,900
Late fee percentage = 4.5% or 0.045
Late fee = $23,900 * 0.045 = $1,075.50
So, if City Cellular did not pay the balance by the net date and incurred a late fee of 4½%, they would owe an additional $1,075.50.