Question 1

The difference between the list price and the trade discount is the amount the consumer pays, called the net price.

Accepted Answer

The amount the consumer pays, called the net price, is actually the list price minus the trade discount minus any other discounts, not just the difference between the list price and the trade discount.

Question 2

The single discount equivalent is the:

Accepted Answer

The single discount equivalent is the complement of the net decimal equivalent. This means it is 1 minus the net decimal equivalent, which represents the portion of the price that is not a discount.

Question 3

The complement of 30% is 100%.

Accepted Answer

The complement of 30% is 70%.

Question 4

An invoice dated May 18 received by Plumbing Supply indicated a balance of $9,600.00. The balance included a freight charge of $600.00. Terms of the invoice were 2 / 10, 1 / 15, N / 45. Assuming Plumbing Supply pays the bill on May 30, the amount they should pay is:

Accepted Answer

The answer of An invoice dated May 18 received by...

Question 5

The credit terms, 2 / 10, EOM, means if you pay the invoice within the first 10 days a discount of 2% will be allowed; otherwise the full invoice amount is due at the end of the month.

Accepted Answer

The terms "2 / 10, EOM" mean that a 2% discount is offered if the invoice is paid within 10 days of the end of the month in which the invoice was issued, not within the first 10 days of receiving the invoice.

Question 6

Jud-Jo Distributors received an invoice dated September 22 in the amount of $97.50. The credit terms were 2 / 15, N / 30. A penalty of 6% is imposed for payments made after 30 days. Jud-Jo made a partial payment on October 6 of $50.00 and paid the balance on October 25. What was the amount due?

Accepted Answer

First, we need to calculate the discounted amount for making the payment within 15 days.
2% of $97.50 = $1.95
Amount due within 15 days = $97.50 - $1.95 = $95.55

Jud-Jo made a partial payment of $50 on October 6, which means they still owed $45.55 to the supplier. Since this payment was not made within 15 days, they do not get the 2% discount.

According to the credit terms, the full payment should have been made within 30 days of the invoice date, which was on September 22. Therefore, a penalty of 6% is imposed on the outstanding balance after 30 days.
6% of $45.55 = $2.73

Amount due after penalty = $45.55 + $2.73 = $48.28

Therefore, the amount due to the supplier was $48.28. However, we need to round this answer to the nearest cent, which would be $49.27 (since the decimal place is in the hundredth position and the digit in the next place is greater than or equal to 5).

Question 7

To find the trade discount when the list price and single discount rate are given, use the following formula:

Accepted Answer

The formula to find the trade discount when the list price and single discount rate are given is List price × Single discount rate. Therefore, the correct choice is B.

Question 8

When a partial payment is made during the discount period, the amount credited is:

Accepted Answer

When a partial payment is made during the discount period, the amount credited is equal to the partial payment divided by the complement of the cash discount rate. This is because the complement of the cash discount rate represents the amount that is not being discounted, and the partial payment is only being applied to the non-discounted portion of the invoice. For example, if the cash discount rate is 2% and the partial payment is $100, the amount credited would be $100 divided by (1 - 0.02) which equals $102.04.

Question 9

A director of accounts received an invoice for $614.52, dated November 12, with sales terms 4 / 13 ROG. The merchandise described on the invoice was received December 10. Find the cash discount and net amount paid if the invoice was paid January 10.

Accepted Answer

The terms 4 / 13 ROG mean that a 4% discount is available if the invoice is paid within 13 days after the receipt of goods. Since the goods were received on December 10 and the invoice was paid on January 10, the payment was made well beyond the 13-day discount period. Therefore, no cash discount applies, and the full invoice amount of $614.52 is due.

Question 10

The single discount equivalent is the complement of the net price equivalent.

Accepted Answer

The single discount equivalent is calculated by subtracting the net price equivalent from 1, making it the complement of the net price equivalent.

Question 11

Credit terms of 2 / 15, ROG means you have 15 days from the receipt of the goods to pay the invoice and take a 2% discount.

Accepted Answer

The credit terms of 2/15, ROG means that the buyer has 15 days from the receipt of the goods to pay the invoice and is eligible for a 2% discount if payment is made within that time frame.

Question 12

A dining room set lists for $7,900.00 and carries a trade discount of 25 percent. of $75.00 is not part of the list price. The net price of the dining room set including freight, assuming a cash discount of 4 percent, is:

Accepted Answer

The answer of A dining room set lists for $7,900.00...

Question 13

If a manufacturer offers a discount of 30 / 25 / 5, total discount of 60% is allowed.

Accepted Answer

The manufacturer is offering three separate discounts of 30%, 25%, and 5%. These percentages cannot be added together to get a total discount of 60%. The total discount will be less than 60%.

Question 14

90 days from October 19 is:

Accepted Answer

To find the answer, we can simply count 90 days from October 19. November has 30 days, December has 31 days (since it is not a leap year), and January has 17 days (counting up to the 17th). Therefore, January 17 would be 90 days from October 19.

Question 15

An invoice dated June 29, for $1,678.25, with credit terms of 3 / 10, EOM is received by Bailey, Inc. The last day a discount can be taken is:

Accepted Answer

The credit terms 3/10, EOM mean a 3% discount is available if paid within 10 days after the end of the month in which the invoice is dated. Since the invoice is dated June 29, the end of the month is June 30, so the discount period ends 10 days after that, which is August 10.

Question 16

A dining room set was ordered on August 12, paid for on August 15 and received August 21, and had discount terms of 2 / 10, n / 30, ROG. What is the latest date the cash discount is allowed?

Accepted Answer

The discount period is 10 days from the invoice date, which is August 15. The latest date the cash discount is allowed is August 25 (10 days after August 15).

Question 17

The list price of a keyboard is $796. If the trade discount series offered is 5 / 10 / 15, what is the trade discount?

Accepted Answer

The trade discount series is 5 / 10 / 15. This means that the first discount is 5%, the second is 10% off the net price after deducting the first discount, and the third is 15% off the net price after deducting the first and second discounts.

First, we need to calculate the amount of the first discount:
5% of $796 = 0.05 x $796 = $39.80

Next, we need to find the net price after deducting the first discount:
$796 - $39.80 = $756.20

Now, we can apply the second discount:
10% of $756.20 = 0.1 x $756.20 = $75.62

Finally, we can apply the third discount:
15% of $680.58 = 0.15 x $680.58 = $102.36

Therefore, the total trade discount is $39.80 + $75.62 + $102.36 = $217.51.

The best choice is B.

Question 18

A director of accounts received a bill for $1319, dated July 10, with sales terms 3 / 10 EOM. Find the cash discount and amount due if the bill was paid August 30.

Accepted Answer

The sales terms 3/10 EOM mean that a 3% discount is available if the bill is paid within 10 days after the end of the month of the invoice date. Since the invoice is dated July 10, the discount period ends on August 10. The bill was paid on August 30, which is after the discount period, so no discount applies. The full amount of $1319 is due.

Question 19

Prepay and add means freight charges have been added to an invoice and the buyer is to pay.

Accepted Answer

In a prepay and add scenario, the seller has already paid the freight charges and has added them to the invoice for the buyer to pay.

Question 20

An invoice for a laptop computer that cost $625.68 is dated September 15, with sales terms of 3 / 10 EOM. If the bill is paid October 8, find the cash discount and net amount paid.

Accepted Answer

First, we need to determine the discount amount. The sales terms of 3/10 EOM means that there is a 3% discount if the bill is paid within 10 days of the end of the month (in this case, September). October 1 would be the last day to receive the discount, but since the bill was paid on October 8, the discount is not for the full 3%. Instead, we need to calculate how many days late the payment was:

October 8 (payment date) - September 30 (last day for discount) = 8 days

So the discount would be for 3% * 625.68 = $18.77, rounded to two decimal places.

To find the net amount paid, we subtract the discount from the total cost:

625.68 - 18.77 = $606.91

Therefore, the correct answer is A: Cash discount: $18.77; net amount: $ $606.91.

Quiz 8: Trade and Cash Discounts