Mathematics of Buying

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Mathematics of Buying

• Cash Discounts Ordinary Dating Methods

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Objective 1

• Calculate net cost after discounts.

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Cash Discounts

• Cash discounts are offered as a means of
  encouraging quick payment.

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Cash Discounts
Terms 2/10 n/30
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Objective 2

• Use the Ordinary Dating Method

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Ordinary Dating Method

• Most cash discounts are done using the Ordinary
  Dating Method.

2/10, n/30
2/10, net 30
Read as two ten net thirty
2 2 discount
10 10 days to make payment if you want the
discount
n/30 total number of days to pay the invoice if
buyer doesnt take the cash discount.
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Example 1

• Determine the cash discount.
• Invoice Amount 285
• Terms 3/15, n/30
• Payment will be made within 15 days.

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Example 2

• Determine the cash discount.
• Invoice Amount 485 (includes 15 in shipping)
• Terms 2/10, n/30
• Payment will be made within 10 days.

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Due Dates
31 days
Jan. Mar. May July
Aug. Oct. Dec.
Feb. Apr. June
Sept Nov.
30 days 28 in Feb.
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Objective 3

• Determine whether cash discounts are earned.

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Compute Due Dates 1 of 2
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Compute Due Dates 2 of 2
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Objective 4

• Use postdating when calculating cash discounts.

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Postdating

• Invoices are sometimes postdated.
• Gives the purchaser more time to take advantage
  of the discount.
• Date 7/25 AS OF 08/01

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Postdating
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Objective 5

• Sliding Scale Cash Discounts

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Cash Discounts Sliding Scales

• 3/10, 2/20, 1/30, n/60

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Practice Problems 1 of 3

• Invoice Amount 78.07
• Invoice Date May 5
• Terms net 30
• Date that Invoice is Paid June 1
• Shipping and Insurance 3.18

Amount of Discount _______
Total Amount Due _______
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Practice Problems 2 of 3

• Invoice Amount 1282
• Invoice Date July 1
• Terms 4/15, net 40
• Date that Invoice is Paid July 7
• Shipping and Insurance 21.40

Amount of Discount _______
Total Amount Due _______
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Practice Problems 3 of 3

• Invoice Amount 1080
• Invoice Date July 8
• Terms 5/10, 2/20, n/30
• Date that Invoice is Paid July 26
• Shipping and Insurance 62.15

Amount of Discount _______
Total Amount Due _______
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Textbook Problems

• Practice

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Practice 18, page 244

• List Price of Grill plus Oven 140
• Trade Discount 20/5/10
• Terms 4/10, n/30
• What is the net cost to the purchaser assuming
  trade discount and cash discount are used?

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Practice 19, page 244

• An invoice is dated January 18 and offers terms
  of 6/10, 4/20, 1/30, n/50.
• Find a) the three final discount dates and b) the
  net payment date.