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Office.com received an $8,000 invoice dated April 10. Terms were 2/10, 1/15, n/60.

On April 14, Office.com sent a $1,900 partial payment.

What credit should Office.com receive? What is Office.com's outstanding balance?

Answer :

Office.com should receive a 2/10 credit for the partial payment made on April 14. The outstanding balance is $6,100.

What is Outstanding balance?

Outstanding balance is the amount of money owed on a loan or credit card after accounting for payments and credits applied to the account. It is the current balance of the account and is usually the principal amount plus any interest or fees that have accrued since the last payment was made. Outstanding balance is an important indicator of the current financial health of the borrower and is used to calculate the minimum payment due and the interest rate charged on the account.

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Final answer:

Office.com should receive a credit of $160 and their outstanding balance is $5,940.

Explanation:

The invoice amount is $8,000 and the terms are 2/10, 1/15, n/60. This means that if Office.com pays the invoice within 10 days, they can receive a 2% discount. If they pay within 15 days, they can receive a 1% discount. The "n" number represents the net number of days after which the full amount is due with no discount. In this case, the net number is 60 days. On April 14, Office.com sent a partial payment of $1,900, which is less than the full amount.

To determine the credit Office.com should receive, we need to calculate the amount eligible for the discount.

  1. The 2% discount period is between April 10 and April 20 (10 days after April 10).
  2. The 1% discount period is between April 10 and April 25 (15 days after April 10).
  3. The net payment period is between April 10 and June 9 (60 days after April 10).

Since the partial payment was made on April 14, it falls within the 2% discount period. To calculate the credit, we need to determine 2% of the invoice amount: $8,000 x 0.02 = $160. Therefore, Office.com should receive a credit of $160.

Office.com's outstanding balance is the remaining amount after deducting the credit from the invoice amount and the partial payment.

$8,000 - $160 - $1,900 = $5,940.

Hence, Office.com has an outstanding balance of $5,940.

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