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Dating Terms

Dating Terms. Using your understanding of discounts 2/10, N/30. Dating Terminology. Invoice : lists the quantities and costs of the items purchased.

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Dating Terms

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  1. Dating Terms Using your understanding of discounts 2/10, N/30

  2. 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

  3. 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

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

  5. 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%? • 100-3 = 97% • What is the cash price? • 640 * .97 = 620.80

  6. 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

  7. Example • The net price of goods from Fashion Footwear, to the Mall Shoe Store is $4217.86. 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

  8. 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? • 4217.86 * .92 = 3880.43

  9. 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.

  10. Example • Bob’s Drugstore received an invoice from General Wholesalers. What is the last day that Bob’s can take advantage of the 4% discount? What is the cash price? • Date: July 12 Terms: 4/10 EOM • Total on Invoice: $727.05 • Invoice was paid on August 5th

  11. Answer to Example • We stated the discount rate to be 4%. • When is the last day to take advantage of the discount? • August 10th • Do they make the discount period? • Yes • What is the cash price? • 727.05 * .96 = 697.97

  12. Putting it all together • 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?

  13. 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? • 34.14 * .96 = $32.77

  14. Putting it all together • 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?

  15. 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? • 243.85 * .95 = $231.66

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