Question

The Home Depot was issued an invoice on August 15 for furnitures ordered from their supplier. The furnitures list price was AED 32,000. The terms of payment were 3/10, 2/15, n/30.

a) How much cash discount are they getting if they paid the invoice on August 21?

b) How much would did Home depot would have to pay if they would pay on August 29?

Answer 1

The terms of payment x / y would means that you will get a cash discount of x% if you pay your dues within y days of invoice. So, explanation of the above written 3 terms of payment is:

3/10 = You will get 3% cash discount if you pay furniture dues within 10 days i.e. on or before 24th August

2/15 = You will get 2% cash discount if you pay furniture dues within 15 days i.e. on or before 29th August

n/30 = You will get n% cash discount if you pay furniture dues within 30 days i.e. on or before 13th September

a) If we pay on August 21, we would get cash discount of 3%.

Cash Discount = 3% * 32000 = AED 960

b) If we pay on August 29, we would get cash discount of 2%.

Cash Discount = 2% * 32000 = AED 640

Cash Payment needed = 32000 - 640 = AED 31360.