Merchandise costing $8,700 was purchased on account with credit terms of .5/15, n/45. Two days later, merchandise costing $1,200 was returned to the vendor for full credit. The account was paid in full two weeks after the invoice date.
a. What was the net increase in the merchandise inventory?
b. What was the total amount due the vendor after the merchandise return?
c. How much was paid to the vendor?
d. What is the implicit annual interest rate in the credit terms?
e. If the bank charges you 6% interest on your line of credit, did it make sense to pay the net invoice promptly?