2. TRADE DISCOUNT
An amount or rate by which the catalog, list,
or retail price of an item is reduced when
sold to a reseller. The trade discount reflects
the reseller's profit margin and usually varies
directly with the quantity of the item
purchased.
3. EXAMPLE:
1. Compute the net price and the discount for P45,000
of the furniture set offered at 15% discount rate.
Discount = Discount rate x list price
= 15% x 45,000
= .15 x 45,000
= 6,750
4. EXAMPLE:
2. A dining table set had a list price of 20,000 and was
sold to customer for 15,500. What was the trade
discount rate?
Discount rate = amount of discount / list price
= 4,500 / 20,000
= 0.225
= 22.5 %
Amount of discount = list price - net price
= 20,000 - 15,500
= 4,500
5. EXAMPLE:
3. Mario paid 12,200 for a android phone on sale that
had 15% off the list price. What was the list price of
android phone?
List price = net price / 100% - discount rate
= 12,200 / 100% - 15%
= 12,200 / 85%
= 14, 353
6. EXAMPLE:
4. The net price for a sweatshirt is 20.63. If the store
receives a trade discount of 25% what would the list
price of the sweatshirt be?
List price = net price / 100% - discount rate
= 20.63 / 100% - 25%
= 20.63
75%
= 20.63
0.75
= 27.51
7. EXAMPLE:
5. Compute the net price and the discount for P50,000
of the computer set offered at 10% discount rate.
Discount = Discount rate x list price
= 10% x 50,000
= .10 x 50,000
= 5,000
8. DISCOUNT SERIES
A multiple discounts can be converted to a single
equivalent discount rate (SEDR), w/c will give the
same total discount as the discount series when
taken separately.
FORMULA:
SEDR = 1 – [(100% - DR1)(100% - DR2)(100% - DR3)
…..] and so on.
9. EXAMPLE:
1. Find the single rate equivalent to discount series of
20%, 15%, 10%.
DR1 = 20% DR2 = 15% DR3 = 10%
SEDR = 1– [(100% - DR1)(100% - DR2)(100% - DR3)]
= 1– [(100% - 20%)(100% - 15%)(100% - 10%)]
= 1– [(80%)(85%)(90%)]
= 1– [(0.80)(0.85)(0.90)]
= 1– 0.612
= 0.388% or 38.8%
10. EXAMPLE:
2. Calculate the single equivalent discount and amount
of trade discount on merchandise listing for 20,000,
less trade discounts of 30%, 10%, 5%.
DR1 = 30% DR2 = 10% DR3 = 5%
SEDR = 1– [(100% - DR1)(100% - DR2)(100% - DR3)]
= 1– [(100% - 30%)(100% - 10%)(100% - 5%)]
= 1– [(70%)(80%)(95%)]
= 1– [(0.70)(0.80)(0.95)] TD = LP X TDR
= 1– 0.5985 = 20,000 X 40.15%
= 8,030
= 0.4015 or 40.15%
11. EXAMPLE:
3. Find the single rate equivalent to the discount
series of 20% and 15%.
DR1 = 20% DR2 = 15%
SEDR = 1– [(100% - DR1)(100% - DR2)]
= 1– [(100% - 20%)(100% - 15%)]
= 1– [(80%)(85%)]
= 1– [(0.80)(0.85)]
= 1– 0.68
= 0.32% or 32%
12. EXAMPLE:
4. A television is listed at 13,000, less discount of 5%,
10%, and 15%.
DR1 = 5% DR2 = 10% DR3 = 15%
SEDR = 1– [(100% - DR1)(100% - DR2)(100% - DR3)]
= 1– [(100% - 5%)(100% - 10%)(100% - 15%)]
= 1– [(95%)(90%)(85%)]
= 1– [(0.95)(0.90)(0.85)]
= 1– 0.72675
= 0.27325 or 27.33%
13. EXAMPLE:
5. A desktop is listed at 15,000, less discount of 10%,
8%, and 5%.
DR1 = 10% DR2 = 8% DR3 = 5%
SEDR = 1– [(100% - DR1)(100% - DR2)(100% - DR3)]
= 1– [(100% - 10%)(100% - 8%)(100% - 5%)]
= 1– [(90%)(92%)(95%)]
= 1– [(0.90)(0.92)(0.95)]
= 1– 0.7866
= 0.2134 or 21.34%
14.
15. Formula
Formula
Retail Discount = List price x Discount rate
Rate Discount = Retail Discount / List Price
List Price = Retail Discount / Rate of
Discount
Net Price = List Price – Retail Price
16. les
xa mp
E
A customer bought a brand new motorcycle that has a list price of 80,000
with 10% discount. How much did the customer actually pay?
Given:
List Price = 80,000
Discount rate = 10%
Solution:
Retail Discount = List price x Discount rate
= 80,000 x 10%
= 8000
Net Price = List Price – Retail Price
= 80000 – 8000
= 72,000
17. A pair of shoes was sold with a given discount of
50.00, which was 5% of the original price.
Compute for the original price of the computer
machine.
Given:
Retail Discount = 50.00
Rate of Discount = 5%
Solution:
List Price = Retail Discount / Rate of
Discount
= 50.00/ 5%
= 1,000.00
18. How much must a buyer pay a dictionary
marked 500.00 less 3% discount?
Given:
List Price =500
Discount rate = 3%
Solution:
Retail Discount = List price x Discount
rate
= 500.00 x 3%
=15
Net Price = List Price – Retail Price
= 500.00 –15
=485.00
19. Maria bought a dress in a shop. The price is 300.00 with a
8% discount. How much did she pay?
Given:
List Price =300
Discount rate = 8%
Solution:
Retail Discount = List price x Discount rate
= 300.00 x 8%
=24
Net Price = List Price – Retail Price
= 300.00 – 24
=276.00
20. A discount of 686.00 was given to Bryan when he bought
a cell phone with a list price of 4,900.00. Find the
discount rate.
Given:
retail discount= 686.00
List price= 4,900.00
Solution:
Rate of discount= retail discount/List price
= 686.00/ 4,900.00
= 0.14 or 14%
22. Cash Discount
Cash Discount
LO 3. A discount given for
the prompt payment
of an
Invoice
account.
Returned Goods
Freight
No Cash
Sales Tax
Discount
&
Trade Discounts
4 - 22
23. Cash Discount
Cash Discount
Discount & Credit Periods
MayWithin 10 Days Discount period
Discount period
Period for buyer to
take advantage of
Discount Terms
Within 30 Days
Credit period
Credit period
Period for buyers to
pay invoices
4 - 23
Terms
Terms
24. Cash Discount
Cash Discount
LO 4. Terms
Terms
Invoice Terms 2/10, n/30
Terms 2/10, n/30
Dated May 3
2% discount IF paid in 10 days
Terms 2/10, n/30 IF Not …then full
amount payable in 30
days May 10th
$500 Paid on
Paidon May 10th
Therefore, discount can be claime
Therefore, discount can be claimed
Net payment
Net payment
4 - 24
25. Find the Cash Discount
and the Net Amount
•Bills are often due within thirty days from
the date of the invoice.
•To encourage prompt payment, companies
offer an incentive of a cash discount if the
invoice is paid within a specified period.
•“2/10 n/30” means “take a 2% cash
discount if paid within 10 days; pay the net
price if covered within 30 days.”
26. Cash Discount
Cash Discount
Formula
Formula N = L(1 – d)
or
Invoice discount= List payment x
Discount rate
Net payment= List payment -
Terms 2/10, n/30
Terms 2/10, n/30 discount
N = 500(1-.02)
$500 = 500(.98)
= $490
= $490
4 - 26
27. Cash Discount
Cash Discount
•Find the cash discount for an invoice dated
December 1 for $1,500 with terms of 2/10 n/30.
•If the invoice is paid on December 9th, for
example, the payment would include the discount
and the amount would be $1,470.
N = L(1 – d)
=1,500(1-.02)
=1,470
•If the invoice is paid on or after December 11th,
the amount to pay would be $1,500.
28. Cash Discount
Cash Discount
Annie’s Plants has received an invoice for $450.00
for potting soil dated November 3 with terms of
5/10 n/30. If the invoice is paid on November 12,
how much would Annie’s pay?
$427.50
N = L(1 – d)
=450.00 (1-.05)
=427.50
What if the bill is paid on November 30?
They would not be able to take the discount and
would have to pay the full amount of $450.
29. Cash Discount
Cash Discount
•An invoice of $500 which reads 2/10
n/30 tells you that a discount of 2% is
available if the payment is made
within 10 days.
•To calculate the net amount directly,
use the complement of the discount
(in this case, 0.98) and multiply it by
the total amount.
$500 x 0.98 = $490 = net amount to be
paid
30. Cash Discount
Cash Discount
•An invoice of $500 which reads 2/10
n/30 tells you that a discount of 2% is
available if the payment is made
within 10 days.
•To calculate the net amount directly,
use the complement of the discount
(in this case, 0.98) and multiply it by
the total amount.
$500 x 0.98 = $490 = net amount to be
paid
31. Cash Discount
Cash Discount
Sycamore Enterprises received a $1,248 bill for
computer supplies dated September 2 with sales
terms of 2/10, 1/15, n/30. A 5% penalty is
charged after 30 days. Find the amount due for
the following dates: September 12, September
15, October 1, October 3.
N = 1248(1 – d)
September 12 (2% discount) = $1,223.04
September 15 (1% discount) = $1,235.52
October 1 (no discount) = $1,248.00
October 3 (5% penalty) = $1,310.40
32. Cash Discount
Cash Discount
An invoice for 600.00 was dated May 1 with
credit terms of 2/10, 1/20, n/30. What
amount should the buyer pay if he pays in
full on a) May 8? B.) May 15? C.) May 31?
c.) it is 30 days
Solution: from May 1 to
a.) It is 7 days from May 1 to May 8. May 31.
Thus, a 2% cash discount is allowed. Thus, no
600 x 2%= 12 discount
600-12= 588 allowed so the
b.) It is 14 days from May 1 to May buyer must
15. Thus, a 1% cash discount is allowed. pay the whole
600 x 1%= 6 amount w/c is
600-6= 594 600.
34. Partial payment
refers to the
offering of a
payment by
check for less
than the full
amount claimed
by the creditor.
35. Payment amount
that is less than
the due amount, is
a part payment for an
unfinished work, or
is an installment
payment.
36.
37.
38. EXAMPLE:
3. If the Semmes Corporation received a $875 invoice
with terms of 3/10 n/30 and could not pay the full
amount within 10 days, but chose to send in a $500
partial payment on Day 5, what amount was
credited to their account?
B (amount credited) = P (partial payment) divided by
R (complement of the discount rate)
B = 500/0.97= $515.46 = amount credited
The balance would be the difference.
$875 - $515.46 = $359.54 = balance
39. 4. Mail Boxes Etc. receives an invoice amounting to
$672.30 with terms of 8/10, net 30 and dated AS OF
September 1. If a partial payment of $450 is made on
Sept. 8, find the credit given for the partial payment.
40. 5. Yogurt for You receives an invoice amounting to
$263.40 with terms of 2/20 EOM and dated
September 6. If a partial payment of $150 is made on
October 14, find the credit given for the partial
payment.
41. References:
Sirug, W. (2010). Business Mathematics. Manila:
Mindshapers Co., Inc.
Altares et al. (2004). Business Mathematics. Manila:
Rex Printing Company. Inc.
42. Prepared by:
Bryan Jay L. Curangcurang
Mariah B. Tipayan
Angela Mae N. Cabanilla
Dionesia C. Retorca
Angelo Ang
Happy Schooling!