Jones Manufacturing sent Blue Company an invoice for equipment with a list price of $10,000. The invoice is dated July 27 with terms of 2/10, EOM. Blue Company is entitled to a 40% trade discount. If the invoice is paid on September 8, how much does Blue pay?

Question

Quizplus · Accepted Answer

Since the invoice is dated after the 25^th of the month, the company has until the 10^th of the second month after the invoice date to receive the discount of 2%. First take the trade discount of 40% off of the invoice, $10,000 × .40 = $4,000, as the trade discount. Subtract this from the invoice to leave $6,000 due on the invoice. Since the invoice was paid before the 10^th, multiply the $6,000 by the complement of the discount rate to get a balance to pay of $5,880 [6,000 × .98 = $5,880].

Jones Manufacturing Sent Blue Company an Invoice for Equipment with a List