If a sale is $100,000 with terms 2/10, n/60 and payment is made in 10 days, what amount is paid?

If a sale is $100,000 with terms 2/10, n/60 and payment is made in 10 days, what amount is paid?

• A. $98,000
• B. $100,000
• C. $102,000
• D. $110,000

Answer: (A)

Cash discounts reduce the invoice amount for early payment. The terms 2/10, n/60 mean a 2% discount is available if payment is made within 10 days; otherwise the full amount is due in 60 days. Since payment is made in 10 days, you take the 2% discount on 100,000. 2% of 100,000 is 2,000, so the amount paid is 100,000 − 2,000 = 98,000. If you paid after 10 days, you’d owe the full 100,000.

Cash discounts reduce the invoice amount for early payment. The terms 2/10, n/60 mean a 2% discount is available if payment is made within 10 days; otherwise the full amount is due in 60 days. Since payment is made in 10 days, you take the 2% discount on 100,000. 2% of 100,000 is 2,000, so the amount paid is 100,000 − 2,000 = 98,000. If you paid after 10 days, you’d owe the full 100,000.