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Exam 7: Discounts: Trade and Cash

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Question 21

Multiple Choice

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Amount of trade discount is represented by the:

A) Base
B) Rate
C) Portion
D) Base divided by rate
E) None of these

F) All of the above
G) B) and D)

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Question 22

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The portion could represent the amount of trade discount in the portion formula.

A) True
B) False

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Question 23

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Trade discounts represent increases to the purchase price.

Chain discounts sometimes may be added together.

Al's Supply sold a chain saw to Mark's Lumber. The list price was $1,250. Al's Supply offered a chain discount of 6/3/1. What was the net price of the chain saw?

A net price equivalent rate of .74225 means that for each $10 the buyer's cost will be approximately 74 cents.

Trade discounts sometimes are taken on freight.

Morgan Company received from Lee Company an invoice dated September 27. Terms were 2/10 EOM. List price on the invoice was $5,000 (freight not included). Morgan receives a 9/7 chain discount. Freight charges are Morgan's responsibility, but Lee agreed to prepay the $150 freight charge. Morgan pays the invoice on November 9. What does Morgan pay Lee?

Walgreens is offered a chain discount on cosmetics from Libby Corp. of 8/5/2; Roma Company offers a chain discount of 7/6/4. What is the highest discount offered?

If the net price of a stove is $900 and the trade discount rate is 40%, the list price is:

Cash discounts are not taken on freight or returned goods.

The single equivalent discount rate is found by taking the net price equivalent rate and adding it to 1.

With terms of 2/10, n/30:

Trade discounts must be paid within the cash discount period.

The net price equivalent rate helps one calculate the actual cost to the seller.

A manufacturer of skis offered chain discounts of 10/5/4 to many of its customers. Joe Jones ordered skis that had a total list price of $149,500. The amount of the trade discount is:

The complement of 17% is:

Knuckles on your hand represent months with 30 days.

Those making partial payments are not allowed to take a cash discount.

4/10, n/30, ROG means a 4% discount can be taken within 10 days before the receipt of goods.