Business Math don't need to round

Question

Garret Company received from Hernet Company an invoice dated September 28. Payment terms are 2/10,n/30. List price on the invoice was $10,500 (freight not included). Garret received a 35/20 chain discount when they were negotiating the price. Frieght charges are Garret's responsibility since it is FOB selling point,but Hernet prepaidthe $145 freight. Garret pays the invoice on Oct. 6th . What is the amount of the check that Garret Company pays to Hernet Company?

Answer 1

Given:

List price = $10,500

Chain discount = 35/20

Terms = 2/10, n/30

Invoice date = September 28

Payment date = October 6

Freight = $145 (FOB shipping point, buyer pays freight)

Freight is not included in the list price.

Step 1: Apply the chain discount

First discount: 35%

10,500 \times 0.35 = 3,675

10,500 - 3,675 = 6,825

Second discount: 20%

6,825 \times 0.20 = 1,365

6,825 - 1,365 = 5,460

Net price = $5,460

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Step 2: Apply the cash discount

Invoice dated September 28.

Terms 2/10 means payment within 10 days receives a 2% discount.

October 6 is 8 days after September 28, so Garret qualifies.

5,460 \times 0.02 = 109.20

Cash discount = $109.20

Amount after discount:

5,460 - 109.20 = 5,350.80

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Step 3: Add freight

Since the terms are FOB shipping point, Garret is responsible for the freight.

5,350.80 + 145 = 5,495.80

Final Answer