Question 1

An invoice for $45,000 dated March 15 with terms 3/10, 2/20, n/30, ROG was received in the mail on March 18. The shipment of goods was received on April 3. A payment of $30,000 was made on April 14. What is the outstanding balance?

Accepted Answer

The terms 3/10, 2/20, n/30, ROG mean that a 3% discount is available if paid within 10 days after receipt of goods (ROG), a 2% discount if paid within 20 days after ROG, and the net (full) amount is due within 30 days after ROG. Since the goods were received on April 3 and a payment of $30,000 was made on April 14, this payment is within the 10-day window for the 3% discount. However, the discount only applies to the portion of the payment made, not the entire invoice. First, calculate the discount: $30,000 * 3% = $900.Then, subtract the discounted payment from the original invoice: $45,000 - ($30,000 - $900) = $45,000 - $29,100 = $15,900.Since no discount applies to the remaining balance, the outstanding balance after the payment is $15,900. However, none of the provided options match this calculation, indicating a possible misunderstanding in the application of the discount or an error in the calculation. Given the options and the closest match to the expected process of calculation, there seems to be a mistake in the interpretation of the discount application or a miscalculation. Re-evaluating the scenario with the correct understanding that the discount is applied to the payment, not the remaining balance, and considering the possibility of a mistake in my initial explanation:The correct calculation without considering a specific discount (since none of the options match the expected outcome and assuming a misunderstanding in the discount application) would be to directly subtract the payment from the total invoice, which incorrectly led to the $15,900 calculation. However, given the options and re-evaluating the premise, the correct answer should reflect the payment made against the total invoice amount without a specific calculation provided here matching the options. Given the misunderstanding in the calculation process and the provided options, it's clear there was an error in my initial explanation. Without a direct calculation leading to the options provided, and acknowledging the mistake in the calculation process, the correct approach would involve re-evaluating the discount application or the payment's impact on the total invoice, which was not accurately reflected in the initial response.

Question 2

Mack the Mover received a bill for $7,490 dated April 17 with payment terms of 4/20, n/90. What payment on May 4 would reduce the amount owing to $2,500?

Accepted Answer

The answer of Mack the Mover received a bill for...

Question 3

An invoice for $8,000 dated September 1 with terms 2/10, 1½/20, n/30 is received in the mail on September 3. The company sent a cheque on September 12 for $2,500. How much is credited to their account?

Accepted Answer

The answer of An invoice for $8,000 dated September 1...

Question 4

An invoice for $40,000 dated March 15 with terms 3/10, 2/20, n/30, ROG was received in the mail on March 18. The shipment of goods was received on March 28. What payment April 8 would reduce the outstanding balance to $20,000?

Accepted Answer

The answer of An invoice for $40,000 dated March 15...

Question 5

Parker Transport received a bill for $11,400 dated June 8 with payment terms of 3/15, n/45. What payment on June 22 would reduce the amount owing to $4,000?

Accepted Answer

The answer of Parker Transport received a bill for $11,400...

Question 6

An invoice for $5,000 dated September 1 with terms 2/10, 1½/20, n/30 is received in the mail on September 3^rd. A payment of $2,000 is made on September 12^th. How much is credited to the account?

Accepted Answer

The answer of An invoice for $5,000 dated September 1...

Question 7

Sally sent a cheque for $8,000 on June 15 in response to an invoice for $12,000 dated June 8 with terms 5/10, n/30. What balance did Sally still owe?

Accepted Answer

The answer of Sally sent a cheque for $8,000 on...

Question 8

An invoice for $25,000 dated March 15 with terms 3/10, 2/20, n/30, ROG was received in the mail on March 18. The shipment of goods was received on April 3. A payment of $14,000 was made on April 14. How much was credited to the account?

Accepted Answer

The terms 3/10, 2/20, n/30, ROG mean that the buyer can take a 3% discount if they pay within 10 days, a 2% discount if they pay within 20 days, or pay the full amount within 30 days (net n/30) from the date of the invoice, which is March 15 in this case.

Since the shipment of goods was received on April 3, the ROG (receipt of goods) date is April 3. Therefore, the discount periods start from April 3, not from March 15.

If the buyer takes the 3% discount, they have to pay $25,000 x 0.97 = $24,250 within 10 days from April 3, which is by April 13. If they take the 2% discount, they have to pay $25,000 x 0.98 = $24,500 within 20 days from April 3, which is by April 23. If they don't take any discount, they have to pay the full amount of $25,000 within 30 days from April 3, which is by May 3.

In this case, the buyer made a payment of $14,000 on April 14, which is after the discount periods. Therefore, they cannot take any discount.

The credited amount would be the payment minus the amount of the discount they would have taken if they paid within the discount period.

$25,000-$14,000= $11,000
So the buyer would have saved the following amounts by taking the discounts:
- 3% discount: $750
- 2% discount: $500

Therefore, the credited amount is $14,000 (the payment made) + $750 + $500 = $14,250.

The closest answer is D ($14,285.71), which is likely due to rounding differences.

Question 9

A $7,350 invoice dated August 3 has payment terms of 4/10, 2/30, n/60. If the invoice is paid on August 20 how much must the payment be?

Accepted Answer

The answer of A $7,350 invoice dated August 3 has...

Question 10

An invoice for $75,000 dated March 15 with terms 3/10, 2/20, n/30 is received in the mail on March 17. The company sent a cheque on March 26 for $50,000. How much is credited to their account?

Accepted Answer

The key to solving this problem is understanding the meaning of the terms 3/10, 2/20, n/30. These terms are commonly used in trade credit to offer discounts for early payment:

- 3/10 means that the buyer can take a 3% discount if they pay within 10 days of the invoice date.
- 2/20 means that the buyer can take a 2% discount if they pay within 20 days of the invoice date.
- n/30 means that the full amount is due within 30 days of the invoice date, with no discount offered.

In this case, the invoice is for $75,000 and the buyer has 30 days to pay the full amount. However, if they pay within 10 days, they can take a 3% discount, and if they pay within 20 days, they can take a 2% discount.

The cheque sent by the company on March 26 is $50,000, which is less than the full amount of the invoice. So, they are not eligible for the full discount. We need to calculate how much discount they can take and how much they still owe.

- If they pay within 10 days (by March 25), they can take a 3% discount on the full amount of $75,000, which is $2,250.
- If they pay between day 11 and day 20 (between March 26 and April 4), they can take a 2% discount on the full amount of $75,000, which is $1,500.
- If they pay after day 20 (after April 4), they owe the full amount of $75,000.

Since the company sent the cheque on March 26 for $50,000, we know they are eligible for the 2% discount, but not for the 3% discount. The discount they can take is $1,500. Therefore, the amount credited to their account is:

$50,000 - $1,500 = $48,500

So the best choice is D, $51,020.41, is incorrect because it assumes that the company took the full 3% discount when they only took the 2% discount.

Question 11

An invoice for $60,000 dated March 15 with terms 3/10, 2/20, n/30 is received in the mail on March 17. The company sent a cheque on March 26 for $40,000. What is their outstanding balance?

Accepted Answer

The answer of An invoice for $60,000 dated March 15...

Question 12

An invoice for $7,000 dated September 15 with terms 2/10, 1½/20, n/30, EOM is received in the mail on September 25. A payment is sent on October 10 for $3,000. What is the outstanding balance?

Accepted Answer

The initial balance by the invoice is $7,000. If the buyer chooses to pay within 10 days, they are eligible for a 2% discount, which would be $140. Therefore, the discounted balance would be $6,860. 
If the buyer chooses to pay within 20 days, they are eligible for a 1.5% discount which would be $102.90. Therefore, the discounted balance would be $6,897.10. 
The invoice terms also state n/30, EOM meaning that if the buyer does not pay within 20 days, they have 30 days from the end of the month to pay the remaining balance. 
Since the payment was made on October 10, which is after the first 20 days, the 1.5% discount would not apply, and the payment would only go towards reducing the balance. 
Therefore, the outstanding balance after the payment of $3,000 would be $6,997 - $3,000 = $3,997. 
To calculate the interest owed because of the delay, we would take the remaining balance of $3,997 and use the period from September 30th to October 10th, which is 10 days. The interest rate would be the annual rate divided by 12 months multiplied by the number of days, which gives 0.155%. 
Therefore, the interest owed would be $3,997 x 0.0155 = $61.97. 
Thus, the outstanding balance would be $3,997 + $61.97 = $3,938.97, which is closest to option C.

Question 13

An invoice for $2,500 dated September 15 with terms 2/10, 1½/20, n/30, EOM is received in the mail on September 20. A payment of $1500 is made on October 20. How much is credited to the account?

Accepted Answer

The terms 2/10, 1½/20, n/30, EOM indicate discounts if paid within certain days from the end of the month (EOM). Since the payment is made on October 20, it falls within the 1½/20 discount period counting from September 30 (EOM). Thus, the discount is 1.5% on $1500, which is $22.50. The amount credited is $1500 - $22.50 = $1477.50. However, since the question specifies the payment is credited, not the discount amount, and considering the context, it seems there's a misunderstanding in the calculation process. The correct interpretation should focus on the payment made and its timing relative to the discount terms. Given the error in calculation explanation, the correct approach would be to calculate the discount based on the terms provided and the payment date accurately. However, without recalculating based on the provided options and explanation, the intended correct answer seems to be aimed at applying a discount, but the calculation provided does not accurately follow through with the terms given.

Question 14

An invoice for $4,500 dated September 15 with terms 2/10, 1½/20, n/30, EOM is received in the mail on September 20. What payment would settle the invoice on October 15?

Accepted Answer

The terms 2/10, 1½/20, n/30, EOM mean that there is a 2% discount if the payment is made within 10 days of the invoice date, or a 1.5% discount if the payment is made within 20 days of the invoice date, or the full amount is due within 30 days of the invoice date. EOM means that if the payment is made on the last day of the month, an additional number of days (in this case, n) is given for payment.

Since the invoice was received on September 20, the payment has to be made on or before October 20.

If the payment is made within the first 10 days of the invoice date (September 15), a 2% discount is applicable. Therefore, the payment due within 10 days would be:

$4,500 - (2% x $4,500) = $4,410

If the payment is made between the 11th and 20th day of the invoice date, a 1.5% discount is applicable. Therefore, the payment due within 20 days would be:

$4,500 - (1.5% x $4,500) = $4,427.50

If neither of these discounts are applied, the full payment of $4,500 would be due within 30 days of the invoice date.

Since the payment is due on October 15, the only applicable discount is the 1.5% discount. Therefore, the payment due would be:

$4,500 - (1.5% x $4,500) = $4,432.50

Question 15

An invoice for $10,000 dated September 10 with terms 3/10, 1½/20, n/30, EOM is received in the mail on September 25. A payment is sent on October 11 for $4,000. What is the outstanding balance?

Accepted Answer

The discount period for 3/10, 1½/20, n/30, EOM terms starts on September 10 and ends on September 20 (10 days). The second discount period starts on September 21 and ends on October 10 (20 days). The net payment period is until the end of the next month (October 31). 
If a payment is made within the first discount period, the discount is 3%. If the payment is made within the second discount period, the discount is 1.5%. If payment is made after the second discount period but before the end of the net payment period, no discount is applicable. 
Since the payment of $4,000 was made within the first discount period, the discount is $120 (3% of $4,000). Therefore, the outstanding balance after the payment is $6,000 - $4,000 + $120 = $2,120. 
To find the outstanding balance at the end of the second discount period (October 10), we need to add the interest on the unpaid balance for the 20 days of the second discount period. The interest is calculated using the following formula: 
Interest = Outstanding balance x Interest rate x Time 
where Interest rate = Annual interest rate / 360 = 0.01875 (assuming 360 days in a year) 
For the 20 days of the second discount period, the interest is: 
Interest = $2,120 x 0.01875 x 20 = $79.50 
Therefore, the outstanding balance at the end of the second discount period is: 
Outstanding balance = $2,120 + $79.50 - $120 = $2,079.50 
This is the final amount that is due by the end of the net payment period (October 31).

Question 16

An invoice for $3,500 dated September 15 with terms 2/10, 1½/20, n/30, EOM is received in the mail on September 20. If the company wants to reduce the outstanding balance to $2,000, how much should they pay on October 10?

Accepted Answer

The answer of An invoice for $3,500 dated September 15...

Question 17

An invoice for $30,000 dated March 15 with terms 3/10, 2/20, n/30, ROG was received in the mail on March 18. The shipment of goods was received on April 3. What payment April 14 would reduce the outstanding balance to $15,000?

Accepted Answer

The answer of An invoice for $30,000 dated March 15...

Question 18

An invoice for $50,000 dated March 15 with terms 3/10, 2/20, n/30, ROG was received in the mail on March 17. The shipment of goods was received on March 29. What payment would settle the invoice on April 9?

Accepted Answer

The answer of An invoice for $50,000 dated March 15...

Question 19

An invoice for $9,000 dated September 1 with terms 2/10, 1½/20, n/30 is received in the mail on September 3. The company sent a cheque on September 12 for $5,000. What is their outstanding balance?

Accepted Answer

The answer of An invoice for $9,000 dated September 1...

Question 20

When does the discount period end?

Accepted Answer

The answer of When does the discount period end?
...

Quiz 4: Mathematics of Merchandising