Question

You are in the Accounts Payable dept. for XYZ Hospital. The Hospital has received an invoice from ABC Medical Supplies for $1,000 dated February 13, 2018 with the payment terms 2%10/EOM. The invoice was for $880.00 for supplies, $80.00 for freight charges and $40.00 for sales taxes. a. When do you have to pay the invoice in order to earn the discount? (specific date) b. What will the discount be? ( in terms of actual dollars and cents)

Answer 1

The payment term 2% 10/EOM implies that 2% discount is applicable on the total invoice amount if payment is made within 10 days from date of invoice. The prefix of EOM stands for End of Month which additionally implies that the full payment is due within 10 days of starting of the next month.

(a) In order to earn the discount one has to pay within 10 days of the invoice date of Feb 13th, 2018. Therefore, discount can be availed if the invoice is paid latest by 13 + 10 = 23rd Feb,2018.

(b) Discount % =2 %

Therefore, discount amount = 0.02 x 1000 = $ 20