Business Finance math

Question

from the following calculate (a) cash discount (B) net amount paid: Gross invoice (includes frt) $1800 Freight $50 Date of invoice 8/11 terms 2/10, 1/15, n/30 Date of payment 8/22

Answer 1

I was taught that freight is never discounted and must be deducted from the invoice total before calculating the cash discount. $1800 - $50= $1750

 

Invoice is dated 8/11. Invoice is paid 8/22. That is 11 days.

Terms are 2/10, 1/15 so the buyers missed the 2% discount by 1 day. The 1% discount applies.

$1750*.01= $ 17.50 = Cash Discount

 

Invoice total - Cash Discount = Net Due

 

$1800 - $17.50 = $1782.50 Net Due

Answer 2

Gross Invoice = 1800, discount calculation assumes freight is included in discount. If it isn't, subtract 50 (1800-50) from the gross and replace in the calculations below.

 

Invoice issued 8/11, you paid 8/22. That is 11 days. Your discount is 1% (1/15, because you're paying between 11 and 15 days from issue).

 

gross - (gross * discount) = net payment due

1800 - (1800 * .01)

1800 - (18) = 1782