Test your understanding 3
George owes a supplier, Herbie, $2,000 and is owed $3,400 by a
customer, Iris. George offers a cash discount to his customers of 2.5%
if they pay within 14 days and Herbie has offered George a cash
discount of 3% for payment within ten days.
George took advantage of the early settlement discount offered and
paid Herbie within ten days. Iris was expected to take advantage of the
early settlement discount offered to her, and therefore the sales invoice
raised by George was prepared on that basis. However, Iris did not pay
within 14 days and paid the full amount due after 30 days.
(a)
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