On July 1, a company receives an invoice for $800 with the terms 1/10, net 30

On July 1, a company receives an invoice for $800 with the terms 1/10, net 30. On July 15, the payment should be.

(A) 692
(B) 790
(C) 792
(D) 800
(E) 808

The correct answer and explanation is :

Correct Answer: (D) 800

Explanation:

The invoice amount is \$800, and the terms are 1/10, net 30. This means the company is being offered a 1% discount if payment is made within 10 days of the invoice date. Otherwise, the full amount is due within 30 days.

Let’s break down the terms:

• 1/10: A 1% discount is available only if the payment is made within 10 days from the invoice date.
• Net 30: If the discount is not taken, the full invoice amount is due within 30 days.

Now, consider the timing:

• Invoice Date: July 1
• Discount Deadline (10 days): July 11
• Payment Date: July 15

Since the company is paying on July 15, which is 4 days after the 10-day discount period, it is not eligible for the 1% discount.

Calculations:

• If the discount were taken on time (by July 11):
  1% of \$800 = \$8
  Discounted payment = \$800 – \$8 = \$792
• Since payment is on July 15 (past discount deadline):
  The full amount must be paid = \$800

Final Answer: (D) 800

Summary:

Understanding payment terms is critical in business to take advantage of discounts and avoid late fees. In this case, while a discount was available, it required payment by July 11. The company missed that deadline and thus must pay the full invoice amount of \$800. This highlights the importance of timing in financial transactions and cash flow management for businesses.