Multiple Choice
In a perpetual inventory system, credit terms of “2/10, n/60” mean which of the following?
4. Merchandising Operations
Perpetual Inventory - Purchase Discounts
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In a perpetual inventory system, the credit terms 2/10, n/30 are interpreted as which of the following?
A
A 2% discount is allowed if the invoice is paid within 10 days; otherwise, the net amount is due within 30 days.
B
A 10% discount is allowed if the invoice is paid within 2 days; otherwise, the net amount is due within 30 days.
C
A 2% discount is allowed if the invoice is paid within 10 days; otherwise, the net amount is due within 60 days.
D
A 2% discount is allowed if the invoice is paid within 30 days; otherwise, the net amount is due within 10 days.
Verified step by step guidance1
Understand that credit terms like 2/10, n/30 are common in accounting to specify payment conditions between buyers and sellers.
The first part '2/10' means a 2% discount is offered if the invoice is paid within 10 days. This encourages early payment.
The 'n/30' part means the net (full) amount is due within 30 days if the discount period is missed.
So, the buyer can either pay within 10 days and take a 2% discount or pay the full amount within 30 days without any discount.
Therefore, the correct interpretation is: A 2% discount is allowed if the invoice is paid within 10 days; otherwise, the net amount is due within 30 days.
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