Deck 7: Discounts: Trade and Cash

Question 1

Trade discounts sometimes are taken on freight.

Answer 1

False

Question 2

A single equivalent discount rate of 0.45975 means the buyer saves approximately 46 cents per $1 of list price.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

Chain discounts sometimes may be added together.

Question 7

The complement of 25% is 52%.

Question 8

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

Question 9

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

Question 10

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

Question 11

The complement of 10% is 90%, or in decimal 0.90.

Question 12

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

Question 13

A net price equivalent rate of 0.74225 means that for each $10 the buyer's cost will be approximately 74 cents.

Question 14

Amounts of trade discounts are not fixed.

Question 15

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

Question 16

Sellers' catalogs list only the net price.

Question 17

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

Question 18

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

Question 19

Trade discounts represent increases to the purchase price.

Question 20

Net price plus amount of trade discount equals list price.

Question 21

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

Question 22

Trade discounts must be paid within the cash discount period.

Question 23

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

Question 24

Knuckles on your hand represent months with 30 days.

Question 25

FOB shipping point means the seller pays cost of freight.

Question 26

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 27

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

Question 28

2/10, EOM means that the cash discount period ends on the tenth day of the month that follows the sale, as long as the invoice is dated 25th or earlier in the month.

Question 29

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

Question 30

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

Question 31

Feb. 15 is 71 days from Nov. 29.

Question 32

50 days from July 9 is August 28.

Question 33

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

Question 34

A discount period is always greater than the credit period.

Question 35

The net price equivalent rate of 10/20/5 is 0.684.

Question 36

The single equivalent discount rate of 9/5/4 is 0.17008.

Question 37

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

Question 38

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

Question 39

Cash discounts are not taken on freight or returned goods.

Question 40

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

Question 41

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 42

Which month has 30 days?

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

Question 43

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 44

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 45

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

A)$360
B)$2,250
C)$1,500
D)$540
E)None of these

Question 46

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 47

200 days from March 3 is:

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

Question 48

60 days from Nov. 19 is:

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

Question 49

Amount of trade discount is represented by the:

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

Question 50

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 51

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 52

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

A)0.36573
B)0.63573
C)0.36427
D)0.63427
E)None of these

Question 53

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 54

The complement of 35% is:

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

Question 55

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 56

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 57

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 58

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

A)0.09712
B)0.90288
C)0.00002
D)0.99998
E)None of these

Question 59

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 60

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 61

Match the following terms with their definitions.

-List price

A)Criteria on invoice
B)Seller pays cost of freight
C)Could be calculated by table look-up
D)Savings from early payment
E)Cash discount within first 10 days in next month after sale
F)Amount of time to take advantage of a cash discount
G)Discount period begins when goods are received
H)100% less stated percent
I)List price minus amount of trade discount
J)Time period sellers give buyers to pay invoices
K)1 - net price equivalent rate
L)Buyer pays cost of freight
M)Actual cost to buyer per dollar
N)2/10, n/30
O)Two or more trade discounts
P)List price minus net price
Q)Suggested retail price

Question 62

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

A)0.0273
B)0.784827
C)0.488173
D)215173
E)None of these

Question 63

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 64

Match the following terms with their definitions.

-Credit period

A)Criteria on invoice
B)Seller pays cost of freight
C)Could be calculated by table look-up
D)Savings from early payment
E)Cash discount within first 10 days in next month after sale
F)Amount of time to take advantage of a cash discount
G)Discount period begins when goods are received
H)100% less stated percent
I)List price minus amount of trade discount
J)Time period sellers give buyers to pay invoices
K)1 - net price equivalent rate
L)Buyer pays cost of freight
M)Actual cost to buyer per dollar
N)2/10, n/30
O)Two or more trade discounts
P)List price minus net price
Q)Suggested retail price

Question 65

Brooks Brothers bought a suit that has a list price of $1,219, with a chain discount of 7/4/2. What is the net price of the suit?

A)$682.64
B)$1,166.65
C)$1,066.56
D)$152.44
E)None of these

Question 66

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 67

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 68

Match the following terms with their definitions.

-Cash discount

A)Criteria on invoice
B)Seller pays cost of freight
C)Could be calculated by table look-up
D)Savings from early payment
E)Cash discount within first 10 days in next month after sale
F)Amount of time to take advantage of a cash discount
G)Discount period begins when goods are received
H)100% less stated percent
I)List price minus amount of trade discount
J)Time period sellers give buyers to pay invoices
K)1 - net price equivalent rate
L)Buyer pays cost of freight
M)Actual cost to buyer per dollar
N)2/10, n/30
O)Two or more trade discounts
P)List price minus net price
Q)Suggested retail price

Question 69

Match the following terms with their definitions.

-FOB shipping point

A)Criteria on invoice
B)Seller pays cost of freight
C)Could be calculated by table look-up
D)Savings from early payment
E)Cash discount within first 10 days in next month after sale
F)Amount of time to take advantage of a cash discount
G)Discount period begins when goods are received
H)100% less stated percent
I)List price minus amount of trade discount
J)Time period sellers give buyers to pay invoices
K)1 - net price equivalent rate
L)Buyer pays cost of freight
M)Actual cost to buyer per dollar
N)2/10, n/30
O)Two or more trade discounts
P)List price minus net price
Q)Suggested retail price

Question 70

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 71

Match the following terms with their definitions.

-Due dates

A)Criteria on invoice
B)Seller pays cost of freight
C)Could be calculated by table look-up
D)Savings from early payment
E)Cash discount within first 10 days in next month after sale
F)Amount of time to take advantage of a cash discount
G)Discount period begins when goods are received
H)100% less stated percent
I)List price minus amount of trade discount
J)Time period sellers give buyers to pay invoices
K)1 - net price equivalent rate
L)Buyer pays cost of freight
M)Actual cost to buyer per dollar
N)2/10, n/30
O)Two or more trade discounts
P)List price minus net price
Q)Suggested retail price

Question 72

Match the following terms with their definitions.

-Discount period

A)Criteria on invoice
B)Seller pays cost of freight
C)Could be calculated by table look-up
D)Savings from early payment
E)Cash discount within first 10 days in next month after sale
F)Amount of time to take advantage of a cash discount
G)Discount period begins when goods are received
H)100% less stated percent
I)List price minus amount of trade discount
J)Time period sellers give buyers to pay invoices
K)1 - net price equivalent rate
L)Buyer pays cost of freight
M)Actual cost to buyer per dollar
N)2/10, n/30
O)Two or more trade discounts
P)List price minus net price
Q)Suggested retail price

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

Match the following terms with their definitions.

-2/10, EOM (before 25^th)

A)Criteria on invoice
B)Seller pays cost of freight
C)Could be calculated by table look-up
D)Savings from early payment
E)Cash discount within first 10 days in next month after sale
F)Amount of time to take advantage of a cash discount
G)Discount period begins when goods are received
H)100% less stated percent
I)List price minus amount of trade discount
J)Time period sellers give buyers to pay invoices
K)1 - net price equivalent rate
L)Buyer pays cost of freight
M)Actual cost to buyer per dollar
N)2/10, n/30
O)Two or more trade discounts
P)List price minus net price
Q)Suggested retail price

Question 75

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)0.7221: Manufacturer A
B)0.7216: Manufacturer B
C)0.2779: Manufacturer A
D)0.2784: Manufacturer A
E)None of these

Question 76

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)0.14348
B)0.839232
C)0.85652
D)0.160768
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

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 79

The complement of 17% is:

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

Question 80

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