### Invoice Calculation Scenario **Problem:** Bally Manufacturing sent Intel Corporation an invoice for machinery with a $14,400 list price. Bally dated the invoice August 06 with 5/10 EOM terms. Intel receives a 40% trade discount. Intel pays the invoice on August 19. What does Intel pay Bally? **Details:** - **List Price:** $14,400 - **Trade Discount:** 40% - **Invoice Date:** August 06 - **Payment Terms:** 5/10 EOM (End of Month) - **Payment Date:** August 19 **Calculations:** 1. **Apply the Trade Discount:** - Trade Discount Amount = $14,400 x 40% = $5,760 - Discounted Price = $14,400 - $5,760 = $8,640 2. **Determine if Payment is Within Discount Period:** - EOM terms start at the end of August. - Payment is made on August 19, so it falls within the 10-day discounted period of the following month. 3. **Calculate Discount for Early Payment:** - If eligible, apply a 5% discount. - Early Payment Discount = $8,640 x 5% = $432 - Total Payable Amount = $8,640 - $432 = $8,208 **Conclusion:** Intel pays Bally $8,208. This scenario illustrates how trade and payment terms can affect the final amount payable for a transaction.
### Invoice Calculation Scenario **Problem:** Bally Manufacturing sent Intel Corporation an invoice for machinery with a $14,400 list price. Bally dated the invoice August 06 with 5/10 EOM terms. Intel receives a 40% trade discount. Intel pays the invoice on August 19. What does Intel pay Bally? **Details:** - **List Price:** $14,400 - **Trade Discount:** 40% - **Invoice Date:** August 06 - **Payment Terms:** 5/10 EOM (End of Month) - **Payment Date:** August 19 **Calculations:** 1. **Apply the Trade Discount:** - Trade Discount Amount = $14,400 x 40% = $5,760 - Discounted Price = $14,400 - $5,760 = $8,640 2. **Determine if Payment is Within Discount Period:** - EOM terms start at the end of August. - Payment is made on August 19, so it falls within the 10-day discounted period of the following month. 3. **Calculate Discount for Early Payment:** - If eligible, apply a 5% discount. - Early Payment Discount = $8,640 x 5% = $432 - Total Payable Amount = $8,640 - $432 = $8,208 **Conclusion:** Intel pays Bally $8,208. This scenario illustrates how trade and payment terms can affect the final amount payable for a transaction.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Invoice Calculation Scenario
**Problem:**
Bally Manufacturing sent Intel Corporation an invoice for machinery with a $14,400 list price. Bally dated the invoice August 06 with 5/10 EOM terms. Intel receives a 40% trade discount. Intel pays the invoice on August 19. What does Intel pay Bally?
**Details:**
- **List Price:** $14,400
- **Trade Discount:** 40%
- **Invoice Date:** August 06
- **Payment Terms:** 5/10 EOM (End of Month)
- **Payment Date:** August 19
**Calculations:**
1. **Apply the Trade Discount:**
- Trade Discount Amount = $14,400 x 40% = $5,760
- Discounted Price = $14,400 - $5,760 = $8,640
2. **Determine if Payment is Within Discount Period:**
- EOM terms start at the end of August.
- Payment is made on August 19, so it falls within the 10-day discounted period of the following month.
3. **Calculate Discount for Early Payment:**
- If eligible, apply a 5% discount.
- Early Payment Discount = $8,640 x 5% = $432
- Total Payable Amount = $8,640 - $432 = $8,208
**Conclusion:**
Intel pays Bally $8,208.
This scenario illustrates how trade and payment terms can affect the final amount payable for a transaction.
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