Question

Stowe-Arts Holdings Co. has a very attractive credit policy, and none of its customers pay in cash when the firm makes a sale. Stowe-Arts Holdings Co. sells to its customers on credit terms of 3/10, net 30.

If a customer bought $200,000 worth of goods and paid the firm cash eight days after the sale, how much cash would Stowe-Arts Holdings Co. get from the customer?
A. $196,000
B. $200,000
C. $160,000
D. $185,000

Answer 1

The question is not entirely correct, the discount is actually 2% not 3%

The correct answer is A,$196,000

Step-by-step explanation:

The amount the Stowe-Arts Holdings co would receive from the customer is the invoice price less 3% of the invoice price as computed below:

cash receipt=invoice amount*(1-3%)

amount of cash=$200,000*(1-2%)=$196,000

The 3% produced an answer is not included as one of the options