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List Price (1 Trade Discount Rate)

There are two types of discounts: trade and cash discounts. 1. Trade discount is deducted from the list price to determine the invoice price. It can be a single or multiple discounts. 2. Cash discount is deducted from the invoice price if payment is made within a specified time period, such as 5% off within 15 days. Failing that, the full invoice price is due within 30 or 60 days with no discount.

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Marc Graham Nacua
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982 views3 pages

List Price (1 Trade Discount Rate)

There are two types of discounts: trade and cash discounts. 1. Trade discount is deducted from the list price to determine the invoice price. It can be a single or multiple discounts. 2. Cash discount is deducted from the invoice price if payment is made within a specified time period, such as 5% off within 15 days. Failing that, the full invoice price is due within 30 or 60 days with no discount.

Uploaded by

Marc Graham Nacua
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© © All Rights Reserved
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Written Work_Types of Discount

Here’s the link to the written work

https://forms.gle/4KLXR4witcX956oo7

Note: Show your solutions on any clean sheet of paper. Take clear pictures of your solutions, paste
them in the MS Word and convert to PDF format.

DEADLINE: UNTIL MARCH 29,2021 (MONDAY) @ 7.00 AM

DISCOUNT
A discount is the amount deducted from the selling price of a product or service. There are two types of discounts:
trade and cash discounts.
1. Trade Discount - is the discount offered by a manufacturer or wholesaler to encourage resellers to
purchase a product and usually stated in a specific amount or percentage discount.
2. Discount Series - is a chain/multiple discount offered on the same item.
3. Cash Discount - is the discount given to persuade customers to pay in cash immediately or within a
specified time.

TRADE DISCOUNT
Trade discount is applied on the list price or price tag.

Formula: Trade Discount = List Price x Trade discount rate

The price after deducting the trade discount is known as the net price or invoice price.

Formula: Invoice Price = List Price − Trade Discount

Or

𝐈𝐧𝐯𝐨𝐢𝐜𝐞 𝐏𝐫𝐢𝐜𝐞 = List Price ( 1 − Trade Discount Rate )

TRADE DISCOUNT SERIES/ DISCOUNT SERIES

Trade Discount Series is also called a multiple discounts/ chain discounts which means it involves more than
one trade discount and to solve for the net price of discount series, use the formula stated below.

Invoice Price = List Price [(1-1st Discount Rate) (1-2nd Discount Rate) (1-3rd Discount Rate)...]

Example:
1. Find the invoice price of a tablet that is listed at ₱ 7 999 and has a trade discount rate of 10%.

Given: List Price = ₱ 7 999, Trade discount rate = 10% = 0.10


Asked: Invoice Price
Formula:
Trade Discount = List Price x Trade discount rate
Invoice Price = List Price − Trade Discount
Solution:

Trade Discount = ₱ 7 999 × 0.10


Trade Discount= ₱ 799.90

Invoice Price= ₱ 7 999 − ₱ 799.90


Invoice Price = ₱ 7 199.10

Answer: Therefore, after applying 10% trade discount rate on the list price, we obtained ₱ 7 199.10 as the
invoice price.

2. Find the invoice price of a smartphone listed for P 10 499 and has a trade discount series of 15%, 10%, 5%.
Given: List price = ₱ 10 499, Trade discount series = 15%, 10%, 5%
Asked: Invoice Price
Formula:
Invoice Price = List Price [(1-1st Discount Rate) (1-2nd Discount Rate) (1-3rd Discount Rate)...]

Solution: Invoice Price = 10 499 [(1 − 0.15) (1 − 0.10) (1 − 0.05)]


Invoice price = 10 499 [(0.85)(0.9)(0.95)]
Invoice price = 10 499 (0.727)
Invoice price = ₱ 7 630.15
Answer: Therefore, the invoice price after applying the trade discount series rate was ₱ 7 630.15.

CASH DISCOUNT

Cash Discount is applied on the invoice price, the price after all trade discounts have been deducted.

TERMS OF PAYMENT
1. 10/15 (the customer will receive 10% discount if he/she pays within 15 days)
2. 5/30 (the customer will receive 5% discount if he/she pays within 30 days)
3. n/60 (the customer will pay the full net amount within 60 days and will not receive any discount )

Use the formulas below to solve for the Cash Discount and Selling Price (price after deducting the cash discount
availed by the customer).

Cash Discount = Invoice Price x Cash Discount Rate


Two ways to solve for the Selling Price;
Selling Price = Invoice Price - Cash Discount

Or

Selling Price = Invoice Price (1 - Cash discount Rate)

Example:
Braniac Enterprises received an invoice of P 7 500 for school supplies dated 4 July with terms of 5/15, n/30. If
the invoice is paid on 15 July, how much cash discount did Braniac Enterprises receive from the supplier? How
much should Braniac Enterprises pay?
Given: List Price = ₱ 7 500, Terms of payment = 5/15, n/30

Date: July 4- July 15, a discount of 5% will be given since the invoice was paid within 15 days.

Asked:
a. Cash Discount
b. Selling Price

Formula:
Cash Discount = Invoice Price x Trade discount rate
Selling Price = Invoice Price − Cash Discount

Solution:

Cash Discount = ₱ 7 500 x 0.05


Cash Discount= ₱ 375

Selling Price= ₱ 7 500 − ₱ 375


Selling Price = ₱ 7 125

Answer: Therefore, Braniac Enterprises will pay ₱ 7 125 after receiving a cash discount of ₱ 375.

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