A trade credit bill of 80,000 with terms of 2/5, net 30 means the buyer saves how much if the bill is paid within the discount period?

• A. 1,600
• B. 800
• C. 0
• D. 3,200

Answer: (A)

Discounts on trade credit reward you for paying early. With terms like 2/5, net 30, you can take a 2% discount if you pay within five days; otherwise you owe the full amount at 30 days. For a bill of 80,000, the discount is 2% of 80,000, which equals 1,600. So paying within the discount period saves 1,600. If you wait, you’d pay the entire 80,000. The other figures would reflect different percentages, but the actual discount here is 2%, i.e., 1,600.