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USING YOUR UNDERSTANDING OF DISCOUNTS 2/10, N/30 Dating Terms

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Dating Terminology Invoice: lists the quantities and costs of the items purchased. Discount Incentive: To encourage prompt payment, the supplier may offer a cash discount if the bill is paid within a certain number of days. Many suppliers use ordinary dating. The exact terms of the discount are stated on the invoice When the discount period and the credit period start on the date of the invoice

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2/10, net 30 2/10, n/30 What does this all mean? 2% cash discount if paid within 10 days of date of invoice. Net price must be paid within 30 days of date of invoice

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Review of Formulas from Discounts Cash Discounts = Net Price * (100%-Discount Rate) 100% - discount rate = paid rate

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Example Terms are 3/10, n/30. Net price is $640. What is the discount rate in this problem? 3% What is the paid percent of 3%? = 97% What is the cash price? 640 *.97 =

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2/10, n/30 ROG ROG: Receipt of Goods 2/10, n/30 ROG means that the discount period starts with the receipt of the goods

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Example The net price of goods from Fashion Footwear, to the Mall Shoe Store is $ If the invoice is paid on December 11, what is the cash price? On an invoice you may find the following information. Invoice Date: 12/05/09 Received Date: 12/05/09 Terms 8/10, n/30

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Answer to Example What is the discount rate? 8% When is the last day to take advantage of the discount? December 15 Do they make the discount period? Yes What is the cash price? *.92 =

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EOM Dating Terms EOM: End of Month Discount period begins AFTER the end of the month 6/15 EOM A 6% cash discount if an invoice is paid within 15 days AFTER the end of the month in which the invoice is issued.

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Example Bobs Drugstore received an invoice from General Wholesalers. What is the last day that Bobs can take advantage of the 4% discount? What is the cash price? Date: July 12 Terms: 4/10 EOM Total on Invoice: $ Invoice was paid on August 5 th

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Answer to Example We stated the discount rate to be 4%. When is the last day to take advantage of the discount? August 10 th Do they make the discount period? Yes What is the cash price? *.96 =

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Putting it all together Date: October 10, 2009McKee Foods CorporationInvoice Number: Corner JunctionTerms: 4/10, n/30Sold By: Independent Distributor Becca QtyDescriptionNet Cost Chewy Choc Chip Chewy Oats & Honey Star Crunch Oatmeal Pies Cherry Pie Choc Chop Cookie Cosmic Brownie Total Store Cost$ What is the discount percent? When is the last day they are able to take advantage of the discount? What is the net price, when paid on October 15, 2009?

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Answer to the Example What is the discount percent? 4% When is the last day they are able to take advantage of the discount? October 20, 2009 What is the net price, when paid on October 15, 2009? *.96 = $32.77

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Putting it all together Date: August 10, 2009Augusta SportswearInvoice Number: Corner JunctionTerms: 5/10, EOMSold By: QtyDescriptionNet Cost Micro poly pant lined Micro poly full zip jacket Total Store Cost$ What is the discount percent? When is the last day they are able to take advantage of the discount? What is the net price, when paid on September 9, 2009?

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Answer to the Example What is the discount percent? 5% When is the last day they are able to take advantage of the discount? September 10, 2009 What is the net price, when paid on September 9, 2009? *.95 = $231.66

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