Copyright © 2008, The McGraw-Hill Companies, Inc.
Example 8.3.11 Roy’s Appliance Hut placed an order for 10 refrigerators that list
for $775, and 8 front loader washing machines listing for $995. The manufacturer
offers trade discounts of 20% and 20%. The delivery (i.e., shipping) cost is $185.
The invoice was dated April 7, 2007, and stated “terms: 2/15, EOM.” If Roy makes
payment on April 30, 2007, how much must he pay?We fi rst calculate the net cost of the items before considering any cash discount.Quantity Product # MSRP Total10
8Refrigerators
Washers$775
$995
$7,750.00
$7,960.00
$15,710.00
($3,142.00)
$12,568.00
($2,513.60)
$10,054.40
Additional 20% discount
Subtotal
Shipping
Total dueSubtotal
LESS: 20% discount
Net$185.00
$10,239.40
DescriptionAccording to the terms offered, Roy is entitled to a 2% discount if he pays before May 15,- He does, so the discount applies, and he will pay 98% of the calculated net cost.
(98%)($10,054.40) $9,853.31. The shipping cost is then added on top of this to arrive at
the total of $9,853.31 $185.00 $10,038.31.
What if an invoice is partially paid, but not paid in full? Different companies treat partial
payments differently. Some may offer the discount on the portion of the invoice paid within
the period, others may offer the discount only if payment is made in full. (See the Addi-
tional Exercises at the end of this section for a partial payment example.)EXERCISES 8.3
Copyright © 2008, The McGraw-Hill Companies, Inc.
Except where stated otherwise, assume that freight or shipping charges are not part of your calculation.A. Trade Discounts- Complete the following table by calculating the total net amount for each order, given the total list price, shipping/
freight charge, and trade discount percent.
Order Total List Price Trade Discount % Freight NetA $173,095 24% $750
B $84,913 16.25% $500
C $22,916 35% $200
D $1,039,035 7.25% includedExercises 8.3 357