Question

Waterway Company purchased merchandise inventory with an invoice price of $10400 and credit terms of 5/10, n/30. What is the net cost of the goods if Waterway Company pays within the discount period

Answer 1

The net cost of the goods will be $9880 as the company pays it back within the discount period.

Procedure:

5/100×10400

1/20×10400

10400/20 = 520

10400-520 = 9880

What are credit terms?

Credit terms are the installment terms referenced on the invoice at the hour of purchasing products. It is an arrangement between the purchaser and dealer about the timings and installment to be made for the products purchased on credit. It is otherwise called payment terms, these include information like discount price, due date etc.

Discount Period :

A discount period is how much time a money discount is accessible for a client to make a diminished money installment while or after taking credit. In other words, this is the time span that a merchant will diminish the cost of an item on the off chance that the client will pay for it in real money.

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