Question
A buyer of \( \$ 7,000 \) 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: Multiple Choice
Ask by Coles Pena. in the United States
Mar 09,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The buyer lost a discount of \$140 by not paying within 15 days.
Solution
1. The invoice amount is \( \$7000 \).
2. The credit terms are \(2/15, \; n/45\). This means the buyer could have taken a \(2\%\) discount if the payment was made within 15 days.
3. The discount amount available is:
\[
\text{Discount} = 0.02 \times 7000 = 140
\]
4. Since the buyer paid at the end of 45 days, the \(2\%\) discount of \( \$140 \) was lost.
Thus, the discount lost by not taking advantage of the cash discount is \( \$140 \).
Answered by UpStudy AI and reviewed by a Professional Tutor
Like
error msg
Explain 
Simplify this solution Beyond the Answer
By not taking advantage of the \( 2\% \) discount for paying within \( 15 \) days, the buyer missed out on savings of \( \$ 140 \). This discount is calculated as \( 2\% \) of \( \$ 7,000 \) (which equals \( \$ 140 \)), and this amount could have been retained by paying early. If the buyer had paid within the \( 15 \) days, the total cost of the merchandise would have been \( \$ 6,860 \) instead of \( \$ 7,000 \). This is a significant savings, showcasing the importance of understanding and utilizing vendor credit terms whenever possible!
