Question

Magenta Company received an invoice of $16,450 for catering services at their annual company picnic. The invoice was dated May 1, 2013, and had the following payment terms: 6/10, 5/15, n/30.

1. Calculate the amount Magenta Company would need to pay if they take advantage of the 6% discount by paying within 10 days.
2. Calculate the amount Magenta Company would need to pay if they take advantage of the 5% discount by paying within 15 days.
3. Calculate the regular payment amount if Magenta Company chooses not to take advantage of the discounts and pays within 30 days.

Answer 1

Magenta Company can pay $15,463 if they take advantage of a 6% discount within 10 days, $15,627.50 for a 5% discount within 15 days, or the full invoice amount of $16,450 if they pay within 30 days without taking any discounts.

Step-by-step explanation:

To calculate the payment amounts for Magenta Company's invoice with the offered payment terms of 6/10, 5/15, n/30, we will need to determine the discount amounts and the total amounts to be paid in each case.

1. Payment with 6% Discount in 10 Days

If they take advantage of the 6% discount by paying within 10 days, the calculation is as follows:

Discount = Invoice Amount x Discount Rate = $16,450 x 0.06 = $987.00

Discounted Payment = Invoice Amount - Discount = $16,450 - $987 = $15,463

2. Payment with 5% Discount in 15 Days

If Magenta Company takes advantage of the 5% discount within 15 days, the amount to pay will be:

Discount = Invoice Amount x Discount Rate = $16,450 x 0.05 = $822.50

Discounted Payment = Invoice Amount - Discount = $16,450 - $822.50 = $15,627.50

3. Regular Payment Amount if Paying within 30 Days

If Magenta Company does not take advantage of the discounts and pays within 30 days, the invoice amount remains the same at $16,450.