Question

Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale for the buyer as well as the seller. Consider this case: Purple Turtle Group buys on terms of 3.5/15, net 60 from its chief supplier. If Purple Turtle receives an invoice for $2,100.98, what would be the true price of this invoice?

Answer 1

$2,027.45

Step-by-step explanation:

Some companies trade on credit instead of cash. These companies allow their customers to pay later for purchases made today. These firms also provide a benefit to their customers with credit terms to pay earlier than the deadline and get discount on the actual invoice price.

In the given scenario, Purple Turtle Group has purchase goods and received an invoice of $2,100.98 with credit terms of 3.5/15, net 60. This means that the payment is due to be paid in next 60 days with a 3.5% discount if the payment is made within next 15 days. The actual invoice price will be then,

$2,100.98 * (100% - 3.5%) = $2,027.45