Question

Vail Ski Shop received a $1.213 invoice dated July 20 with 2/10, 1/15, /60 terms. On August 03, Vail sent a $497 partial payment. a. What credit should Vail receive? (Round your answer to the nearest cent.) Credit b. What is Vail's outstanding balance? (Round your answer to the nearest cent.) Outstanding balance

Answer 1

a) The credit term 2/10, 1/15, n/60 refers to discount of 2% of invoice value if the bill is paid off by or before 10 days from the date of the bill; discount of 1% of invoice value if the bill is paid off by or before 15 days from the date of the bill; otherwise, bill must be paid off be or before 60 days from the date of the bill but without any discount. It is given that the Vali Ski Shop received a bill dated July 20 and a partial payment was sent on August 03. It means that the firm paid partial payment before expiry of 15 days of the bill date. So, firm is eligible for 1% discount on bill amount. As it was the partial payment, the amount sent shall be considered as the net amount after 1% discount to calculate amount of credit enjoyed and amount of total invoice value settled. Partial payment amount paid off Eligible discount % Vali should receive credit of $497 1% $5.02 ($497 x 1%/ (1 - 1%) --> $497 x 1% / 99% = $5.02] b) Partial payment amount paid off Eligible discount % Invoice value paid off Total invoice value Vali's outstanding balance $497 1% $502.02 ($497 / (1 - 1%) --> $497 / 99% = $502.02] $1,213.00 $710.98 ($1213.00 - $502.02]