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Multiple Choice
In the context of net sales, what does the credit term "2/10, n/30, ROG" indicate about when the cash discount period ends?
A
10 days after the invoice date
B
10 days after the receipt of goods
C
30 days after the receipt of goods
D
30 days after the invoice date
Verified step by step guidance
1
Understand the credit term '2/10, n/30, ROG': This term provides information about the payment conditions. '2/10' means a 2% discount is available if payment is made within 10 days. 'n/30' means the net amount (full payment) is due within 30 days. 'ROG' stands for 'Receipt of Goods,' indicating that the timing for the discount and payment period starts from the date the goods are received, not the invoice date.
Identify the cash discount period: The '2/10' part specifies that the buyer can take a 2% discount if payment is made within 10 days. Since 'ROG' is mentioned, the 10-day period begins from the date the goods are received.
Determine the end of the cash discount period: To calculate when the cash discount period ends, add 10 days to the receipt of goods date. This is the last day the buyer can take advantage of the 2% discount.
Clarify the net payment period: The 'n/30' part indicates that the full payment is due within 30 days from the receipt of goods date. This is the maximum time allowed for payment without incurring penalties or interest.
Compare the options provided: Based on the explanation above, the correct interpretation is that the cash discount period ends 10 days after the receipt of goods, not the invoice date or any other timeframe.