Question

2) Burke Company received an invoice dated November 18 for a shipment of goods received November 21. The invoice was for $9255.00 less 40%, 13.375% with terms 5/10, 3/20, n/45. How much must Burke pay on December 2 to reduce its debt a) by $2000.00? b) to $2000.00? c) if Burke Company makes a partial payment of $4000 on November 25, how much should be credited to the account?

Answer 1

Invoice amt. = 9255

Net amount due after successive discounts

9255*(1-40%)*(1-13.375%)=

4810.29

Payment by Burke on Dec 2

to reduce its debt

Dec 2 falls after 10 days but within 20 days

to which 3% discount applies

So,to reduce its debt BY 2000

a) by $ 2000

Payment to be made will be

2000*(1-3%)=

1940

b) reduce its debt TO $2000.00

ie. Payment to be made will be

(4810.29-2000)*(1-3%)=

2725.98

c) if Burke Company makes a partial payment of $4000 on November 25, amount credited to the account:

Nov. 25 falls within 10 days,

to which 5% discount applies

so, when a payment of 4000 is made,

amt. credited will be

4000/(1-5%)*1=

4210.53