NASCLA Accredited Commercial General ContractorGeneral RequirementsMedium
A general contractor is evaluating an invoice from a concrete supplier. The invoice indicates a '2/10 net 30' payment term. If the invoice amount is $15,000, and the contractor pays it on the 8th day, what is the net amount the contractor will pay?
- A$14,850.00
- B$15,000.00
- C$14,700.00
- D$13,500.00
Show answer & explanationAnswer & explanation
Correct answer: C. $14,700.00
The '2/10 net 30' term means a 2% discount is offered if the invoice is paid within 10 days; otherwise, the full amount is due in 30 days. Since the contractor pays on the 8th day, they qualify for the 2% discount. Calculation: $15,000 * 0.02 = $300 discount. Net payment = $15,000 - $300 = $14,700.
Why the other options are wrong
- A. This implies a 1% discount, which is incorrect for '2/10 net 30'.
- B. This would be the payment if no discount was taken or if paid after 10 days.
- D. This implies a 10% discount, which is incorrect for '2/10 net 30'.
Payment Terms (2/10 net 30)
A common payment term offering a cash discount if the invoice is paid within a specified early period, otherwise the full amount is due by a later date.
- 2: The percentage of the discount offered.
- 10: The number of days within which the invoice must be paid to receive the discount.
- net 30: The full (net) amount is due within 30 days if the discount is not taken.
Memory trick: Two percent off if you pay in ten days, otherwise full amount in thirty.