A contractor receives a material invoice dated March 15th with terms of 2/10 net 30. If the invoice amount is $15,000 and payment is made on March 23rd, what amount should be paid?
Correct Answer
B) $14,700
Payment on March 23rd is 8 days from invoice date (March 15th), which qualifies for the 2% early payment discount. $15,000 × 0.02 = $300 discount, so payment amount = $15,000 - $300 = $14,700.
Why This Is the Correct Answer
The payment terms 2/10 net 30 mean a 2% discount is available if payment is made within 10 days of the invoice date. Since the invoice is dated March 15th and payment is made on March 23rd, this is exactly 8 days later, qualifying for the discount. The 2% discount on $15,000 equals $300, making the payment amount $14,700.
Why the Other Options Are Wrong
Option A: $14,850
This represents paying the full invoice amount without taking advantage of the early payment discount. Since payment is made within the 10-day discount period, the contractor is entitled to deduct 2% from the total.
Option C: $15,000
This amount would result from incorrectly calculating a 3.33% discount ($15,000 × 3.33% = $500 discount = $14,500 payment). The terms specify exactly 2% discount, not a higher percentage.
Option D: $14,500
This amount would result from incorrectly calculating a 1% discount ($15,000 × 1% = $150 discount = $14,850 payment). The terms clearly state 2%, not 1% discount for early payment.
Memory Technique
Remember '2/10 net 30' as '2% off if paid in 10 days, full amount due in 30 days' - the first number is always the discount percentage, second is the discount period in days.
Reference Hint
Business and Finance chapter covering payment terms, cash discounts, and accounts payable management
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