Copyright © 2008, The McGraw-Hill Companies, Inc.
Chapter 8 Summary 375Topic Key Ideas, Formulas and Techniques Example(s)
Tr ade Discounts, p. 351 • Items that have a list price or MSRP may be sold
to retailers at a discount to that price.- Calculation of trade discounts is done in the
same way as markdown - Trade discount formula: NP LP(1 d).
Ampersand Computers
bought 12 computers from
the manufacturer. The list
price is $895.00 each and the
manufacturer offers a 25%
trade discount. How much
did Ampersand pay?
(Example 8.3.1)Series Discounts, p. 354 • Series discounts are multiple discounts applied
to a price in succession.- A single discount can be calculated that is
equivalent to a series of discounts.
Find the single discount
equivalent to successive 25%
and 15% discounts.Cash Discounts, p. 355 • Cash discounts are additional discounts offered
for prompt payment.- Cash discounts are calculated like other
discounts. - Some specialized terminology may be used to
indicate what cash discounts are offered.
Roy’s Appliance Hut placed
an order for 10 refrigerators
(list $775) and 8 washers
(list $995). The manufacturer
offered trade discounts of
20% and 20%, and the
invoice was dated April 7,
2007, with “terms 2/15,
EOM.” If Roy makes his
payment on April 30, 2007,
how much must he pay?
(Example 8.3.11)Price Appreciation, p. 363 • Projected future prices based on an assumed
percent appreciation rate can be calculated by
using the compound interest formula.A wine expert predicts that a
rare bottle of wine currently
worth $3,650 will appreciate
at a 7% annual rate. Predict
the price in 10 years.
(Example 8.4.1)Percent (Declining Balance)
Depreciation, p. 363- Depreciation based on an assumed percent can
be calculated by using the compound interest
formula. - The depreciation percent rate is a negative
percent.
To dd just bought a new car
for $23,407. If the value
declines at a 15% annual
rate, what will the value be in
5 years?
(Example 8.4.2)Straight-Line Depreciation,
p. 365- Straight-line depreciation assumes the same
dollar amount of depreciation each year. - Annual depreciation amount:
DR IV ____UL SV
- Depreciated value: DV IV DR(n)
A company purchased a
computer for $2,000. The
useful life is 5 years and the
salvage value is $0. Find
the depreciated value of the
computer after 3 years.
(Example 8.4.3)Partial Year Depreciation,
p. 368- If an item is not in use for an entire year, it may
be depreciated for only the percent of the year
for which it was in use.
If the computer from the
above example was put
into use 7 months before
the end of 2007, how much
depreciation should be
attributed to 2007?
(Example 8.4.5)MACRS, p. 369 • MACRS depreciation is used by businesses
mainly for income tax accounting.- The percent depreciation for each year is given
by a table.
Calculate the 5-year
depreciation for a $2,000
computer, using MACRS.
(Example 8.4.7)