Question

A buyer of $7,800 in merchandise inventory failed to take advantage of the vendor's credit terms of 2/15, n/45, and instead paid the invoice in full at the end of 45 days. By not taking advantage of the cash discount, the buyer lost the discount of:

Answer 1

Answer: $156

Explanation:

It should be noted that credit terms 2/15 simply means that there will be a 2% discount when the customer majes payment within 15 days from the invoice date.

By not taking advantage of the cash discount, the buyer lost the discount of:

= 2% × sales price

= 2% × $7800

= 0.02 × $7800

= $156