Ogden & Ogden receive an invoice for $100, which they pay in nine days. The terms on the invoice indicate 2/10 net 30. How much money did Ogden & Ogden send to the seller?
A. $100
B. $98
C. $102
D. $2.00
E. $96.45
Answer: (B) is the correct choice. The terms on an invoice 2/10 net 30, indicate that the buyers will get a two percent discount if they pay the bill early. This is to increase the amount of cash flow for the seller and to encourage early payment of bills. (A) is not the correct choice. If Ogden & Ogden had paid the bill after the ten-day period, this would have been the amount they owed. (C) is also incorrect. However, if Ogden & Ogden had paid the bill after the 30-day net, they may have owed this interest, depending on the payment terms agreed upon between the buyer and seller. (D) and (E) are simply not correct. The Ogden & Ogden Company would not have paid that amount based upon the terms of the invoice.
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