Deck 7: Discounts: Trade and Cash

Question 1

Trade discounts represent increases to the purchase price.

Answer 1

False

Question 2

The complement of 25% is 52%.

Answer 2

False

Question 3

The net price equivalent rate should be rounded to the nearest hundredth.

Answer 3

False

Question 4

A net price equivalent rate of .74225 means that for each $10 the buyer's cost will be approximately 74 cents.

Question 5

A radio with a net price of $700 and a trade discount rate of 30% has a list price of $1,000.

Question 6

Sellers' catalogs list only the net price.

Question 7

Chain discounts sometimes may be added together.

Question 8

The net price equivalent rate helps one calculate the actual cost to the seller.

Question 9

A chain discount is a series of three or more successive discounts.

Question 10

The single equivalent discount rate is found by taking the net price equivalent rate and adding it to 1.

Question 11

List price × trade discount rate = amount of trade discount.

Question 12

Net price times rate of trade discount equals amount of trade discount.

Question 13

The complement of 10% is 90%, or in decimal .90.

Question 14

The trade discount results if the customer pays the bill within the discount period.

Question 15

The portion could represent the amount of trade discount in the portion formula.

Question 16

Trade discounts sometimes are taken on freight.

Question 17

Amounts of trade discounts are not fixed.

Question 18

Net price plus amount of trade discount equals list price.

Question 19

A single equivalent discount rate of .45975 means the buyer saves approximately 46 cents per $1 of list price.

Question 20

Net price times single equivalent discount rate equals amount of trade discount.

Question 21

Knuckles on your hand represent months with 30 days.

Question 22

The net price equivalent rate of 10/20/5 is .684.

Question 23

A cash discount is a reduction from the gross amount of the invoice if payment is made within the discount period.

Question 24

2/10, n/30 is an example of the ordinary dating method.

Question 25

4/10, n/30, ROG means a 4% discount can be taken within 10 days before the receipt of goods.

Question 26

Trade discounts must be paid within the cash discount period.

Question 27

2/10, n/30 means the credit period is 30 days from the end of the discount period.

Question 28

2/10, EOM means that the cash discount period ends on the tenth day of the month that follows the sale.

Question 29

Feb. 15 is 71 days from Nov. 29.

Question 30

2/10, EOM means the credit period ends 20 days after the end of the discount period.

Question 31

A discount period is always greater than the credit period.

Question 32

FOB shipping point means the seller pays cost of freight.

Question 33

3/10, 1/15, n/30 means that a 3% cash discount is available from day 11 to day 15.

Question 34

Those making partial payments are not allowed to take a cash discount.

Question 35

A cash discount sometimes is taken on the amount of trade discount.

Question 36

Sometimes the seller will prepay the freight if it is FOB destination.

Question 37

Goods sold after the 25^th of the month with terms of 2/10, EOM results in the discount period being extended 10 days longer.

Question 38

Cash discounts are not taken on freight or returned goods.

Question 39

50 days from July 9 is August 28.

Question 40

The single equivalent discount rate of 9/5/4 is .17008.

Question 41

Amount of trade discount equals:

A) List price × trade discount rate
B) List price + trade discount rate
C) List price divided by trade discount rate
D) Net price × trade discount rate
E) None of these

Question 42

An invoice dated March 6 with terms of 1/10, EOM results in the end of the discount period on:

A) May 10
B) April 10
C) May 30
D) May 31
E) None of these

Question 43

2/10, n/30, ROG means the cash discount period ends:

A) Within 10 days of beginning date of invoice
B) Within 30 days of beginning date of invoice
C) 20 days after beginning date of invoice
D) 10 days after the goods are received
E) None of these

Question 44

A local college bookstore paid a net price of $12,500 for textbooks for the coming semester. The publisher offered a trade discount of 20%. The publisher's original list price was:

A) $15,000
B) $15,500
C) $15,625
D) $2,500
E) None of these

Question 45

200 days from March 3 is:

A) September 18
B) September 17
C) September 19
D) September 20
E) None of these

Question 46

If the net price of a stove is $900 and the trade discount rate is 40%, the list price is:

A) $3,600
B) $2,250
C) $1,500
D) $1,260
E) None of these

Question 47

With terms of 2/10, n/30:

A) Credit period is 10 days from date of invoice
B) Credit period is 40 days
C) Credit period extends into first 10 days of next month
D) Credit period is 30 days from date of invoice
E) None of these

Question 48

Amount of trade discount is represented by the:

A) Base
B) Rate
C) Portion
D) Base divided by rate
E) None of these

Question 49

Cash discounts are:

A) Always calculated on list price
B) Sometimes calculated with freight
C) Sometimes calculated with returned goods
D) Never calculated on freight and returns
E) None of these

Question 50

Roland Corporation buys stoves from a wholesaler. The list price of a stove is $900, with a trade discount of 30%. The net price is:

A) $270
B) $1,170
C) $630
D) $360
E) None of these

Question 51

60 days from Nov. 19 is:

A) Jan. 16
B) Jan. 17
C) Jan. 18
D) Jan. 19
E) None of these

Question 52

2/10, n/30 is an example of:

A) Ordinary dating
B) Receipt of goods
C) End of month
D) Extra dating
E) None of these

Question 53

The credit period is:

A) Always shorter than the discount period
B) Always 30 days from end of discount
C) Always twice the length of discount period
D) Long enough so buyers can always take a cash discount
E) None of these

Question 54

FOB shipping point means:

A) Seller pays the cost of freight
B) Buyer pays the cost of freight
C) Title to goods shifts to buyer while being shipped
D) Seller cannot pay cost of freight
E) None of these

Question 55

The single equivalent discount rate of the trade discount 5/4/1 is:

A) .09712
B) .90288
C) .00002
D) .99998
E) None of these

Question 56

The actual credit one receives in making a partial payment is calculated by taking the partial payment and dividing by (1 + the discount rate).

Question 57

Which of the following is usually not true about customer catalogs?

A) Contain list price
B) Completely updated once a year with a new revised catalog
C) Updated by discount sheets
D) Trade discount amounts will differ from product to product
E) None of these

Question 58

Which month has 30 days?

A) January
B) May
C) June
D) July
E) None of these

Question 59

The complement of 35% is:

A) 53%
B) 65%
C) 56%
D) 165%
E) None of these

Question 60

The net price equivalent rate of 9/15/18 is:

A) .36573
B) .63573
C) .36427
D) .63427
E) None of these

Question 61

Brenda purchased a total of five computers for $3,300. She received a 20% trade discount. What did Brenda pay for the computers?

A) $2,640
B) $2,460
C) $2,440
D) $3,750
E) None of these

Question 62

An invoice dated 5/19/xx received by Jones Supply indicated a balance of $17,000. This balance included a freight charge of $1,000. Terms of the bill were 5/10, 4/30, n/60. Assuming Jones pays off the bill on June 4, he pays:

A) $16,762.27
B) $16,000.55
C) $15,762.72
D) $16,000.84
E) None of these

Question 63

An invoice dated March 12 in the amount of $50,000 is received by Reliance Corporation on March 16. Cash discount terms on the invoice are 3/10, n/30. On March 16 Reliance mails a check in the amount of $8,000 as partial payment on the invoice. The outstanding balance owed on the invoice is:

A) $8,247.42
B) $41,752.58
C) $8,240.00
D) $41,760.00
E) None of these

Question 64

Calculate the End of Discount Period and End of Credit Period.
Aug. 19 (Aug. 9 + 10 days)

Question 65

A local RadioShack store wants to buy a new line of plasma TVs. Manufacturer A offers chain discounts of 18/12, and Manufacturer B offers terms of 17/13. Which single equivalent discount rate is the best deal?

A) .7221: Manufacturer A
B) .7216: Manufacturer B
C) .2779: Manufacturer A
D) .2784: Manufacturer A
E) None of these

Question 66

A manufacturer of skis offered chain discounts of 10/5/4 to many of its customers. Joe Jones ordered skis that had a total list price of $149,500. The amount of the trade discount is:

A) $122,709.60
B) $26,970.40
C) $26,790.40
D) $122,907.69
E) None of these

Question 67

Walgreens is offered a chain discount on cosmetics from Libby Corp. of 8/5/2; Roma Company offers a chain discount of 7/6/4. What is the highest discount offered?

A) .14348
B) .839232
C) .85652
D) .160768
E) None of these

Question 68

The net price equivalent rate of 3/7/13 is:

A) .0273
B) .784827
C) .488173
D) 215173
E) None of these

Question 69

Calculate the net price based on the information given below.

Question 70

Morgan Company received from Lee Company an invoice dated September 27. Terms were 2/10 EOM. List price on the invoice was $5,000 (freight not included). Morgan receives a 9/7 chain discount. Freight charges are Morgan's responsibility, but Lee agreed to prepay the $150 freight charge. Morgan pays the invoice on November 9. What does Morgan pay Lee?

Question 71

Calculate the list price based on the information given below.

Question 72

Jones Advertising Agency received a $3,000 invoice dated June 8. Terms were 2/10, 1/15, n/60. On June 22 Jones Advertising sent a $1,600 partial payment. What credit should Jones Advertising receive? What is Jones's outstanding balance? Round to the nearest cent.

Question 73

J.C. Penney of Boston sold office equipment for $12,000 to Lee's of San Diego. Terms of the sale are 3/10, n/30 FOB Boston. J.C. Penney has agreed to prepay freight $300. Assuming Lee's pays within the discount period, how much will Lee's pay J.C. Penney?

A) $11,640
B) $8,544
C) $8,644
D) $11,940
E) None of these

Question 74

The complement of 17% is:

A) 71%
B) 60%
C) 83%
D) 38%
E) None of these

Question 75

Which option yields the highest single equivalent discount?

Question 76

Joanne's Dress Shop received an invoice dated July 25 for $1,400, with terms of 2/10, 1/15, n/60. On August 8, Joanne's Dress Shop sent a partial payment of $750. The actual amount that should be credited is:

A) $765.31
B) $765.30
C) $757.58
D) $757.59
E) None of these

Question 77

A bedroom set lists for $12,000 and carries a trade discount of 30%. Freight (FOB shipping point) of $150 is not part of list price. Calculate the delivered price of the bedroom set including the freight. Assume a cash discount of 2%.

A) $8,232
B) $8,382
C) $8,385
D) $8,832
E) None of these

Question 78

Black & Decker Manufacturing sold a set of saws to True Value Hardware. The list price was $3,800. Black & Decker offered a chain discount of 8/3/1. The net price of the saws is:

A) $3,537.12
B) $3,537.21
C) $3,391.12
D) $3,357.21
E) None of these

Question 79

Calculate the net price and amount of trade discount (use net price equivalent rate as well as single equivalent discount rate):

Question 80

Calculate the list price based on the information given below.