Donna Pierce manages a business that distributes imported woolen fabrics. Donna's business offers a 2.5% cash discount on any amount paid within 10 days of the invoice date. On January 28, a client purchased fabrics priced at $14,500, and on February 1 the client sent in a $10,000 check. Compute the unpaid balance. (This problem involves the partial payment of an invoice within the discount period.)

Donna Pierce

The unpaid balance is:

= $4,243.60.

Explanation:

a) Data and Calculations:

Cash discount on any amount paid within 10 days of the invoice = 2.5%

Sales value of Fabrics bought on January 28 by a client = $14,500

Check made by the client on February 1 = $10,000

Total amount paid through the check = $10,000/100-2.5%

= $10,000/0.975 = $10,256.40

Amount unpaid = $4,243.60 ($14,500 - $10,256.40)

Check:

2.5% discount on $10,256.40 = $256.40 ($10,256.40 * 2.5%)