An invoice states terms of 2/10 net 30, where the invoice amount is $100. What is the cash discount for someone paying the invoice in 25 days?
A. $2
B. $4
C. $6
D. $1
E. There is no cash discount.
Answer: (E) The term 2/10 net 30 means that if the invoice is paid within ten days, the buyer is afforded a 2% discount. In this case, the invoice was paid after the ten-day period offering the discount; thus, there is no discount. (A) is incorrect, although it would be correct if the buyer were to pay the invoice within the allotted ten-day period. (B), (C), and (D) are incorrect even if the invoice were paid within the ten-day period. The invoice must be paid within the 30-day period as 2/10 net 30 means that there is a 2% discount if paid within ten days, but the net (or balance) due must be paid within 30 days.