Question

I am trying to figure this out. I know I am not right. I was looking for some help on how to get the proper answer.

Morgan Company received from Lee Company an invoice dated September 27. Terms were 2/10 EOM. List price on the invoice was $5,000 (freight not included). Morgan receives a 9/7 chain discount. Freight charges are Morgan’s responsibility but Lee agreed to prepay the $150 freight charge. Morgan pays the invoice November 9. What does Morgan pay Lee?

Here is my answer:

So I know because he pays on the 9th he gets a 2% discount.

Which now brings the list price from $5,000 to $4,900

This is the part where I am confused 9/7 discount.So when I convert it to a percent it is 1.29%..Is this right.

So I think i take $4,900 - 1.29% so then ($63.21)<--So this would be the dollar amount I subtract from $4,900
= $4,836.79.

I am not sure if I subtract or add $150.00.

Can anyone help me?

Answer 1

Beginning price $5000. Terms are 2/10 End of Month. Paying on the 9th (before the 10th day of the month) triggers the 2% discount. $100 off.
New price $4900. Chain discounts apply. 4900 * 0.91 * 0.93 = $4146.87
Add in the $150 that Morgan agreed to repay for the shipping, the the final invoice price is $4316.87

Answer 2

Invoice dated september 27 Morgan pay invoice November 9 therefore the 2% discount expired.

5000x.09=450. 5000-450=4550. 4550x.07=318.50 4550-3180.50=4231.50+ 150=4381.20

Answer 3

2/10 Discount (considering Morgan payed before the 10 day period)

Discount: $5,000 * 2/10 = $100 (deducted)

= Net Price: $4,900
Chain Discount (9/7)
= $4900 * .09 = $441 --> $4900-$441= $4459 --> $4459 * .07 = $312.13 --> $4459- $312.13 = $4146.87
Add Freight Charge of $150
$4146.87 +$150
= $4296.87