Question

The equipment, including sales tax, was purchased on open account, with payment due in 30 days. The other expenditures listed above were paid in cash. What is the payment term for the equipment?

1) Cash on delivery
2) Net 30
3) Net 60
4) Credit card

Answer 1

The payment term for the equipment is Net 30, indicating that the payment is due within 30 days from the purchase date, which differs from immediate payment methods like credit cards.

Step-by-step explanation:

The payment term for the equipment described is Net 30. This term means that the full payment for the equipment is due within 30 days from the date of purchase. It is different from paying with a credit card, which immediately transfers money from the credit card company's account to the seller, and the user then owes money to the credit card company at the end of the billing cycle; a credit card is considered a short-term loan. When considering large purchases, such as a vehicle, understanding these terms and considering the duration of a loan or the payment terms is critical to financial planning.