Question

True Value received an invoice dated May 9th 2020. the invoice had a $5,900 balance that included $900 freight.terms were 4/10, 3/30, n/60, true value pays the invoice on May 23rd, what amount this true value pay

Answer 1

Let's begin by identifying key information given to us:

Invoice = $5,900

Freight = $900

4/10 means that True value will be discounted at 4% if it pays within 10 days from date of issuance. The 10th day would be 19th May 2020

3/30 means that True value will be discounted at 3% if paid from the 11th day till the 30th day

May 23rd is after the 10th day but it occurs within the 30 days period. Hence, the True value will be discounted at 3%

The freight cannot be subjected to discount. As such, it is removed from the Invoice as shown below:

$\begin{gathered} =5,900-900=5,000 \\ =5,000 \end{gathered}$

We will proceed to apply the disount of 3%, we have:

$\begin{gathered} \Rightarrow5,000\text{ x }3\text{\%} \\ =5,000(0.03) \\ =150 \end{gathered}$

The True value is given by:

$\begin{gathered} 5,000-150=4,850 \\ TrueValue=\text{\ }4,850 \end{gathered}$