An invoice for office furniture for $1,210.88 with terms of 2/10, N/60 is dated

Question

An invoice for office furniture for $1,210.88 with terms of 2/10, N/60 is dated October 3.
(A) What is the last date on which the cash discount may be taken?
(B) If paid within discount period, how much is the cash discount?
(C) If the discount is missed, on what day does the credit period end?

An invoice for office furniture for $1,210.88 with terms of 2/10, N/60 is dated October 3. What is the last date on which the cash discount may be taken? If paid within discount period, how much is the cash discount? If the discount is missed, on what day does the credit period end?

Explanation / Answer

A) October 3 is day 0. October 4 "starts the clock" as day 1 of the 10 day discount period. October 13th is the last day in which the cash discount may be taken.

B) The cash discount is 2% of the invoice. N = L - dL

N = L ( 1 - d)

N = $1,210.88 (1 - 0.02)

N = $1,210.88 (0.98)

N = $1,186.67

If the cash discount is taken the amount paid would be $1,186.87; a $24.21 discount.

C)The credit period ends after 60 days. Again October 3 is day 0 and October 4 "starts the clock" as day 1. December 3 would be day 60.

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