On July 1, a company receives an invoice for $800 with the terms 1/10, net 30.On July 15, the payment should be..a. $692b. $790c. $792d. $800e. $808
The Correct Answer and Explanation is :
To determine the payment amount due on July 15 for an invoice of $800 with terms 1/10, net 30, we first need to understand what these terms mean:
- 1/10: This indicates that a 1% discount is available if the invoice is paid within 10 days of the invoice date.
- Net 30: This means the total amount is due within 30 days, with no discount available after the 10-day period.
Calculation Steps:
- Determine the Discount Period:
The invoice was received on July 1, so the discount period extends to July 11. Since July 15 is beyond this date, the discount is no longer applicable. - Calculate Payment Without Discount:
Since the payment is being made after the discount period, the total amount due is the full invoice amount of $800.
Conclusion:
The options provided are as follows:
- a. $692
- b. $790
- c. $792
- d. $800
- e. $808
Since the payment is made after the 10-day period for the discount, the correct answer is d. $800.
Explanation:
The reason for the above conclusion is grounded in the specific terms of the invoice. Paying within the discount period would have allowed the company to take advantage of a 1% reduction, making the payment $792 ($800 – $8). However, as the payment date falls outside this period, the company must remit the entire invoice amount. This scenario emphasizes the importance of adhering to payment terms in business transactions, as missing the discount period can lead to higher costs. Businesses often rely on such discounts to manage cash flow effectively, so understanding when these discounts apply is crucial for maintaining good financial practices.
Thus, for the payment due on July 15, the total payable remains $800.