Question

An invoice for $121,100 dated June 28, 2014 for a shipment of furniture has payment terms 2.5/15, E.O.M. What payment will settle the invoice if it is paid on the following dates.

A. July 6?
B. July 15
C. July 31

Answer 1

The settlement amount for an invoice with terms 2.5/15, E.O.M. of $121,100 is $118,072.50 if paid on July 6 or July 15 (within the discount period), and $121,100 if paid on July 31 (outside the discount period).

Step-by-step explanation:

The student's question involves calculating the settlement amount for an invoice with discount terms. The given invoice amount is $121,100 with payment terms of 2.5/15, E.O.M. (End of Month). This means the buyer can benefit from a 2.5% discount if the invoice is paid within 15 days after the end of the invoice month (June).

A. If the payment is made on July 6, this falls within the discount period. Therefore, the payment amount would be calculated as follows:

Discount Amount = Invoice Amount x Discount Percentage = $121,100 x 2.5% = $3,027.50

Payment Amount = Invoice Amount - Discount Amount = $121,100 - $3,027.50 = $118,072.50

B. A payment on July 15 also falls within the discount period, so the settlement calculation is identical to that of July 6:

Payment Amount = $118,072.50

C. However, a payment on July 31 falls outside the discount period. As such, the full invoice amount is due without any discount:

Payment Amount = Invoice Amount = $121,100