Podcast
Questions and Answers
A company purchases goods with a list price of $50,000, subject to a 10% trade discount. They are offered a 5% cash discount for payment within 30 days. If the company takes the cash discount, how much will they pay?
A company purchases goods with a list price of $50,000, subject to a 10% trade discount. They are offered a 5% cash discount for payment within 30 days. If the company takes the cash discount, how much will they pay?
- $47,500
- $45,000
- $42,750 (correct)
- $50,000
A business buys equipment listed at $200,000 with a 15% trade discount and a 2% cash discount for early payment. If the business pays within the discount period, what is the final amount paid?
A business buys equipment listed at $200,000 with a 15% trade discount and a 2% cash discount for early payment. If the business pays within the discount period, what is the final amount paid?
- $170,000
- $166,600
- $197,000
- $167,000 (correct)
What is the primary difference between a trade discount and a cash discount?
What is the primary difference between a trade discount and a cash discount?
- Trade discounts are offered to all customers, while cash discounts are only for large purchases.
- Trade discounts encourage prompt payment, while cash discounts compensate for bulk orders.
- Trade discounts reduce the list price regardless of payment timing, while cash discounts incentivize quick payment. (correct)
- Trade discounts are calculated after cash discounts.
A retailer purchases $10,000 worth of goods with a 8% trade discount and 3% cash discount if paid within 10 days. If the retailer pays within 10 days, what amount should they remit?
A retailer purchases $10,000 worth of goods with a 8% trade discount and 3% cash discount if paid within 10 days. If the retailer pays within 10 days, what amount should they remit?
A company is offered terms of '5/10, net 30' on an invoice for $25,000. This means they receive a:
A company is offered terms of '5/10, net 30' on an invoice for $25,000. This means they receive a:
A business receives an invoice for $100,000 with a 10% trade discount and payment terms of 2/10, net 30. If the business pays within 10 days, what is the total amount due?
A business receives an invoice for $100,000 with a 10% trade discount and payment terms of 2/10, net 30. If the business pays within 10 days, what is the total amount due?
Why might a seller offer a cash discount to its customers?
Why might a seller offer a cash discount to its customers?
A firm buys goods listed at $75,000 subject to a 5 % trade discount and 2% cash discount for payment within 15 days. If they remit payment in 10 days, what is the total amount owed to the seller?
A firm buys goods listed at $75,000 subject to a 5 % trade discount and 2% cash discount for payment within 15 days. If they remit payment in 10 days, what is the total amount owed to the seller?
Which of the following correctly describes how trade and cash discounts impact a company's financial statements?
Which of the following correctly describes how trade and cash discounts impact a company's financial statements?
An invoice shows a list price of $120,000 with a 12% trade discount and terms 3/15, net 45. What amount should the buyer pay if they remit payment within 10 days?
An invoice shows a list price of $120,000 with a 12% trade discount and terms 3/15, net 45. What amount should the buyer pay if they remit payment within 10 days?
Flashcards
What is the net price?
What is the net price?
The price after deducting the trade discount. In this case: $100,000 - (5% of $100,000) = $95,000
What is the payment with cash discount?
What is the payment with cash discount?
The payment made within 30 days to receive a 2.5% discount, calculated as: $95,000 - (2.5% of $95,000) = $92,625
Study Notes
- X Co. buys goods with a $100,000 list price.
- A 5% trade discount applies.
- An additional 2.5% cash discount is available for payment within 30 days.
- To calculate the final payment amount, first apply the 5% trade discount to the list price: $100,000 * 0.05 = $5,000 discount.
- Subtract the trade discount from the list price: $100,000 - $5,000 = $95,000.
- Next, calculate the 2.5% cash discount on the discounted price: $95,000 * 0.025 = $2,375 discount.
- Subtract the cash discount from the trade-discounted price: $95,000 - $2,375 = $92,625.
- Assuming X Co. takes both discounts, the final payment will be $92,625.
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