seCtIon I • the InvoICe 195
REvIEw ExERCIsEs
What word is represented by each of the following abbreviations?
Using the Panorama Products invoice below, extend each line to the amount column and
calculate the subtotal and total. Then answer Questions 9–22. (Note: although 26 boxes of
2″ reflective tape were ordered, only 11 boxes were shipped. Charge only for the boxes shipped.)
Section i
7
9. Seller Panorama Products
11. Invoice date June 16, 20XX
10. Invoice number R-7431
12. Cust. order # 12144
21.
1
2
” Tape $350.40
1
No.
INVOICEINVOICE
QTY. ORDERED QTY. SHIPPED DESCRIPTION UNIT AMOUNT
SALESMAN SHIPPED VIA
SOLD TO: SHIP TO:
INVOICE DATE
CUSTOMER’S
ORDER NO.
TERMS F.O.B.
Panorama Products
486 5th Avenue
Eureka, CA 95501
Effingham, ILNet 30 DaysGilbert Trucking H. Marshall
J. M. Hardware Supply
2051 West Adams Blvd.
Lansing, MI 48901
SAME
R-7431
June 16, 20XX
12144
16 cases Masking Tape 1/2” Standard
16 cases
$21.90
Frequently, merchandise that is ordered
from vendors is “out of stock” and goes
into back-order status.
As a general rule, companies charge
only for the merchandise that is
shipped.
in the
Business World
85461_ch07_hr_189-228_1.indd 195 9/23/15 7:55 PM
196 Chapter 7 • InvoICes, trade dIsCounts, and Cash dIsCounts
No.
INVOICEINVOICE
QTY. ORDERED QTY. SHIPPED DESCRIPTION UNIT AMOUNT
SALESMAN SHIPPED VIA
SOLD TO: SHIP TO:
INVOICE DATE
CUSTOMER’S
ORDER NO.
TERMS F.O.B.
Hamilton Mills
115 Rock Creek Road
Charlotte, North Carolina 28235
Charlotte, N.C.Net 30 DaysFederal Express
The Bedding Warehouse
406 Maple Road
Franklin, VA 23851
SAME
49485
July 9, 20XX
49485
42 ea. Sheets, king
$45.10 $1,894 20
busInEss DECIsIon: ManagIng MERChanDIsE
23. You are the store manager for The Bedding Warehouse. The invoice below is due for
payment to one of your vendors, Hamilton Mills.
b. Your warehouse manager reports that there were three king-size sheets and five
queen-size sheets returned, along with four packages of queen pillow cases. Calculate
the revised totaldue.
c. The vendor has offered a 4% early payment discount that applies only to the merchandise,
not the shipping or insurance. What is the amount of the discount?
d. What is the new balance due after the discount?
Retail store managers manage stores
that specialize in selling a specific line
of merchandise, such as groceries,
meat, liquor, apparel, furniture,
automobile parts, electronic items, or
household appliances.
Exactostock/SuperStock
85461_ch07_hr_189-228_1.indd 196 9/23/15 7:55 PM
REvIEw ExERCIsEs
Calculate the following trade discounts. Round all answers to the nearest cent.
List Price Trade Discount Rate Trade Discount
1. $860.00 30% $258.00
StepS FOR CalCUlaTInG TRaDE DIsCOUnT RaTE
Step 1. Calculate the amount of the trade discount.
ExamplE5
CalCulatIng the sIngle trade
dIsCount and rate
sterling Manufacturing sells tools to american Garden supply. In a recent transaction, the
list price of an order was
$47,750
and the net price of the order was
$32,100
. Calculate
the amount of the trade discount. What was the trade discount rate? Round your answer
to the nearest tenth percent.
SolutionStrategy
Trade discount =List price −Net price
tryitexerciSe 5
Wilson Sporting Goods recently sold tennis rackets listing for
$109,500
to The Sports Authority.
$63,300
CHECK YOUR ANSWERS WITH THE SOLUTION ON PAGE 223.
7
Section ii
seCtIon II • trade dIsCounts—sIngle 199
200 Chapter 7 • InvoICes, trade dIsCounts, and Cash dIsCounts
Calculate the following trade discounts and net prices to the nearest cent.
List Price Trade Discount Rate Trade Discount Net Price
6. $286.00 25% $71.50 $214.50
Calculate the following net price factors and net prices by using the complement
method. Round all answers to the nearest cent.
List Price Trade Discount Rate Net Price Factor Net Price
10.
$3,499.00
37% 63% $2,204.37
Calculate the following trade discounts and trade discount rates. Round answers
to the nearest tenth of a percent.
List Price Trade Discount Trade Discount Rate Net Price
17. Find the amount of a trade discount of 30% on a television set that has a list price of $799.95.
18. Find the amount of a trade discount of 55% on a set of fine china that lists for $345.70.
19. What is the amount of a trade discount of 45% on a dining room table that lists for
$395.50
?
20. Whole Foods Market ordered 12 cases of organic vegetable soup with a list price of
$18.90 per case and 8 cases of organic baked beans with a list price of $33.50 per case.
The wholesaler offered Whole Foods a 39% trade discount.
a. What is the total extended list price of the order?
b. What is the total amount of the trade discount on this order?
c. What is the total net amount Whole Foods owes the wholesaler for the order?
21. La Bella, a chain of clothing boutiques, purchased merchandise with a total list price of
$25,450
from Sandy Sport, a manufacturer. The order has a trade discount of 34%.
a. What is the amount of the trade discount?
b. What is the net amount LaBella owes Sandy Sport for the merchandise?
22. An item with a trade discount of 41% has a list price of $289.50. What is the net price?
A number of supermarkets now make
supporting local growers and producers
a priority. Whole Foods, one such store,
opened in 1980 and four years later
stores in North America and the
store chains. It is the world’s leading
85461_ch07_hr_189-228_1.indd 200 9/23/15 7:55 PM
23. Nathan and David Beauty Salon places an order for beauty supplies from a wholesaler. The list
price of the order is
$2,800
. If the vendor offers a trade discount of 46%, what is the net price
of the order?
24. A watch has a list price of
$889
and can be bought by Sterling Jewelers for a net price of $545.75.
a. What is the amount of the trade discount?
b. What is the trade discount rate?
25. Nutrition Central pays $11.90 net price for a bottle of 60 multivitamins. The price represents a
30% trade discount from the manufacturer. What is the list price of the vitamins?
26. You are the buyer for the housewares department of the Galleria Department Store.
A number of vendors in your area carry similar lines of merchandise. On sets of
microwavable serving bowls, Kitchen Magic offers a list price of
$400
per dozen less a 38%
trade discount. Pro-Chef offers a similar set for a list price of
$425
less a 45% trade discount.
a. Which vendor is offering the lower net price?
b. If you order 500 dozen sets of the bowls, how much money will be saved by using the
lower-priced vendor?
busInEss DECIsIon: QuanTITy DIsCounT
27. You are the purchasing manager for Tiger Electronics, a company that manufactures scanners and
other computer peripherals. Your vendor for scanner motors, Enfield Industries, is now offering
“quantity discounts” in the form of instant rebates and lower shipping charges as follows:
Quantity Net Price Rebate Shipping
1–500
motors
$16
none $1.30
501–1,000
motors 16 $1.20
.90
1,001–2,000
motors 16 1.80
.60
a. Calculate the cost of the motors, including shipping charges, for each category.
b. If you usually purchase 400 motors per month, what percent would be saved per motor by
ordering 800 every two months? Round to the nearest tenth of a percent.
c. What percent would be saved per motor by ordering
1,200
every three months? Round to the
nearest tenth of a percent.
17.30
General nutrition Centers, Inc.,
a wholly owned subsidiary of GNC
Corporation, consists of a worldwide
The GNC website, www.gnc.com,
provides an online library where consumers
may research health-related topics.
seCtIon II • trade dIsCounts—sIngle 201
85461_ch07_hr_189-228_1.indd 201 9/23/15 7:55 PM
202 Chapter 7 • InvoICes, trade dIsCounts, and Cash dIsCounts
d. How much money can be saved in a year by purchasing the motors every three months
instead of every month?
e. (Optional) What other factors besides price should be considered before changing your
purchasing procedures?
trade discoUnts—series
Trade discounts are frequently offered by manufacturers to wholesalers and retailers in a series
of two or more, known as chain or series trade discounts. For example, a series of 25% and 10%
is verbally stated as “25 and 10.” It is written
25/10
. A three-discount series is written
25/10/5
.
Multiple discounts are given for many reasons. Some of the more common ones follow.
Position or Level in the Channel of Distribution A manufacturer might sell to a retailer
at a 30% trade discount, whereas a wholesaler in the same channel might be quoted a 30%
calcUlating net Price and the amoUnt of a trade
discoUnt by Using a series of trade discoUnts
Finding net price with a series of trade discounts is accomplished by taking each trade dis-
chain or series trade discountsTerm
used when a vendor offers a buyer more
than one trade discount.
7-6
ExamplE6
CalCulatIng net prICe and the amount
of a trade dIsCount
Calculate the net price and trade discount for merchandise with a list price of
$2,000
less
trade discounts of
30/20/15
.
SolutionStrategy
7
Section iii
a trade association, is an organization
founded and funded by businesses that
operate in a specific industry. An industry
trade association participates in public
relations activities such as advertising,
education, political donations, lobbying,
and publishing, but its main focus is
collaboration between companies, or
standardization.
Associations may offer other services,
such as sponsoring conferences, providing
85461_ch07_hr_189-228_1.indd 202 9/23/15 7:55 PM
seCtIon III • trade dIsCounts—serIes 205
REvIEw ExERCIsEs
Calculate the following net price factors and net prices. For convenience, round
net price factors to five decimal places when necessary.
List Price Trade Discount Rates Net Price Factor Net Price
1. $360.00
12/10
.792 $285.12
Calculate the following net price factors and single equivalent discounts. Round to five places
when necessary.
Trade
Discount
Rates
Net Price
Factor
Single
Equivalent
Discount
7.
15/10
.765 .235
20/15/12
25/15/7
35/15/7.5
Complete the following table. Round net price factors to five decimal places
when necessary.
List Price
Trade
Discount
Rates
Net Price
Factor
Single
Equivalent
Discount
Trade
Discount Net Price
12.
$7,800.00
15/5/5
.76713 .23287 $1,816.39 $5,983.61
13. 1,200.00
20/15/7
.6324 .3676 $441.12 $758.88
25/15/5
12/10/10
30/20/5.5
7
Section iii
claSSroom actiVity
step 2. Calculate the single equivalent discount.
tryitexerciSe 8
The Rainbow Appliance Center purchased an order of dishwashers and ovens listing for
$36,800
.
The manufacturer allows Rainbow a series of trade discounts of
25/15/10
. What are the single
equivalent discount and the amount of the trade discount?
CHECK YOUR ANSWERS WITH THE SOLUTIONS ON PAGE 223.
425.80
18/15/5
20/10/10
15/10/5
206 Chapter 7 • InvoICes, trade dIsCounts, and Cash dIsCounts
18. What is the net price factor of a
25/15
series of trade discounts?
19. What is the net price factor of a
35/20/15
series of discounts?
20. Kidzstuff.com ordered toys, games, and videos from a vendor. The order had a list price of
$10,300
less trade discounts of
25/15/12
.
a. What is the net price factor?
b. What is the net price of the order?
21. Legacy Designs places an order for furniture listing for
$90,500
less trade discounts of
25/20
.
a. What is the net price factor?
b. What is the net price of the order?
22. Audio Giant received an order of Sirius XM satellite radios listing for
$9,500
with trade
discounts of
25/13/8
.
a. What is the net price factor?
b. What is the single equivalent discount?
c. What is the amount of the trade discount?
d. What is the net price of the order?
23. The Speedy Auto Service Center can buy auto parts from Southeast Auto Supply at a series
discount of
20/15/5
and from Northwest Auto Supply for
25/10/8
.
a. Which auto parts supplier offers a better discount to Speedy?
Southeast Northwest
b. If Speedy orders
$15,000
in parts at list price per month, how much will it save in a year by
choosing the lower-priced supplier?
24. Irazu Market buys supplies from Octet Distributors with a series discount of
35/20/10
.
a. What is the single equivalent discount?
b. What is the amount of the trade discount on an order with a list price of
$6,500
?
satellite radio, also called digital
from a network of satellites more
than 22,000 miles above the earth.
Sirius XM Radio, Inc., offers a
programming lineup of 135 channels
of commercial-free music, sports,
news, talk, entertainment, traffic,
andweather. Subscribers can listen
onmore than 800 different types of
Daniel Acker/Bloomberg/Getty Images
85461_ch07_hr_189-228_1.indd 206 9/23/15 7:55 PM
seCtIon III • trade dIsCounts—serIes 207
25. Midtown Market received the following items at a discount of
25/20/10: 18
cases of canned
peaches listing at $26.80 per case and 45 cases of canned pears listing at $22.50 per case.
a. What is the total list price of this order?
b. What is the amount of the trade discount?
c. What is the net price of the order?
26. Shopper’s Mart purchased the following items. Calculate the extended total after the trade dis-
counts for each line, the invoice subtotal, and the invoice total.
Quantity Unit Merchandise Unit List
Trade
Discounts
Extended
Total
150 ea. Blenders $59.95
20/15/15
$5,197.67
20/10/10
25/10/5
2
Toasters 400 ×39.88 ×.648 =$10,336.90 Juicers 12 ×460 ×.64125 =$3,539.70
27. Referring back to Exercise 26, you have just been hired as the buyer for the kitchen division of
Shopper’s Mart, a general merchandise retailer. After looking over the discounts offered to the
previous buyer by the vendor, you decide to ask for better discounts.
After negotiating with the vendor’s salesperson, you now can buy blenders at trade discounts
of
20/20/15
and juicers at
25/15/10
. In addition, the vendor has increased the volume
discountto
61
2
%.
a. How much would have been saved with your new discounts based on the quantities of the
previous order (Exercise 26)?
Blenders $4,891.92 $20,486.97 Original net
b. As a result of your negotiations, the vendor has offered an additional discount of 2% of the
total amount due if the invoice is paid within 15 days instead of the usual 30 days. What
would be the amount of this discount?
The Pharmacy and Drug store
Industry in the United States
retails a range of prescription and
208 Chapter 7 • InvoICes, trade dIsCounts, and Cash dIsCounts
Cash DisCounts anD terms of sale
As merchandise physically arrives at the buyer’s back door, the invoice ordinarily arrives
by mail through the front door. Today more and more arrive by e-mail. What happens next?
The invoice has a section entitled terms of sale. The terms of sale are the details of when the
invoice must be paid and whether any additional discounts will be offered.
Commonly, manufacturers allow wholesalers and retailers 30 days or even longer to pay
terms of saleThe details of when
an invoice must be paid and if a cash
discount is being offered.
in which a buyer can take advantage of
the cash discount.
discount dateThe last day of the
discount period.
Business Decision: The ulTimaTe TraDe DiscounT
28. A General Motors incentive program designed to reduce inventory of certain low-selling models
offers a
$7,000
extra dealer incentive for each of these vehicles that the dealer moved into its
rental or service fleets.
As the accountant for a dealership with a number of these vehicles left in stock, your man-
ager has asked you to calculate certain invoice figures. The normal trade discount from GM is
18%. If the average sticker price (list price) of these remaining vehicles at your dealership is
$23,500
, calculate the following.
a. What is the amount of the trade discount, including the incentive?
b. What is the trade discount rate? Round to the nearest tenth of a percent.
c. What is the net price (invoice price) to your dealership?
d. If the cars were then sold from the fleets at
$1,000
over “invoice” (net price), what is the
total percentage savings to the consumer based on the list price? Round to the nearest tenth
of a percent.
e. (Optional) Although these incentive prices reflect extraordinary discounts to the consumer,
what other factors should a consumer consider before purchasing a “discontinued” brand of
vehicle?
SECTION IV
7
85461_ch07_hr_189-228_2.indd 208 9/23/15 4:40 PM
216 Chapter 7 • InvoICes, trade dIsCounts, and Cash dIsCounts
review exercises
Calculate the cash discount and the net amount due for each of the following transactions.
Amount of
Invoice
Terms of
Sale
Cash
Discount
Net
Amount Due
1.
$15,800.00
3/15, n/30
$474.00 $15,326.00
For the following transactions, calculate the credit given for the partial payment and the net
amount due on the invoice.
Amount of
Invoice
Terms of
Sale
Partial
Payment
Credit for
Partial Payment
Net
Amount Due
6.
$8,303.00
2/10, n/30
$2,500
$2,551.02 $5,751.98
3/10, n/45
4/15, n/60
Complete worked-out solutions for
Exercises 1–9 appear in Appendix B.
ExTRA DATINg
The last dating method commonly used in business today is called extra, ex, or X dating. With
this dating method, the seller offers an extra discount period to the buyer as an incentive for
purchasing slow-moving or out-of-season merchandise, such as Christmas goods in July and
bathing suits in January. An example would be
3/10
, 60 extra. This means the buyer gets
a 3% cash discount in 10 days plus 60 extra days, or a total of 70 days. Once again, unless
otherwise specified, the net date is 20 days after the discount date.
extra, ex, or X datingThe buyer
receives an extra discount period as an
incentive to purchase slow-moving or out-
of-season merchandise.
7
SECTION IV
EXAMPLE15
USINg ExTRA
DATINg
What are the discount date and the net date of an invoice dated February 9 with
terms of
3/15
,
40
extra?
SolutionStrategy
tryitexerciSe 15
unless otherwise specified, the net date
is 20 days after the discount date.
2/10, n/45
4/10, n/30
4/10, n/30
seCtIon IV • CASH DISCOUNTS AND TERMS OF SALE 217
b. What is the net date?
using the ordinary dating method, calculate the discount date and the net date for the
following transactions.
Date of Invoice Terms of Sale Discount Date(s) Net Date
10. November 4
2/10, n/45
Nov. 14 Dec. 19
2/24, n/55
3/20, n/45
2/10, 1/20, n/60
4/25, n/90
using the eom, Rog, and extra dating methods, calculate the discount date and the net date
for the following transactions. unless otherwise specified, the net date is 20 days after the
discount date.
Date of Invoice Terms of Sale Discount Date Net Date
15. December 5
2/10
, EOM Jan. 10 Jan. 30
3/15
3/20
2/10
2/10
21. The Apollo Company received an invoice from a vendor on April 12 in the amount of
$1,420
.
The terms of sale were
2/15
,
n/45
. The invoice included shipping charges of
$108
. The vendor
sent
$250
in merchandise that was not ordered. These goods will be returned by Apollo.
(Remember, no discounts on shipping charges or returned goods.)
a. What are the discount date and the net date?
b. What is the amount of the cash discount?
c. What is the net amount due?
22. An invoice is dated August 21 with terms of
4/18
EOM.
a. What is the discount date?
23. An invoice dated January 15 has terms of
3/20
ROG. The goods are delayed in shipment and
arrive on March 2.
a. What is the discount date?
b. What is the net date?
218 Chapter 7 • InvoICes, trade dIsCounts, and Cash dIsCounts
24. What payment should be made on an invoice in the amount of
$3,400
dated August 7 if the terms
of sale are
3/15
,
2/30
,
n/45
and the bill is paid on
a. August 19?
b. September 3?
25. Red Tag Furniture received a SeaLand container of sofas from Thailand on April 14. The
invoice, dated March 2, was for
$46,230
in merchandise and
$2,165
in shipping charges.
The terms of sale were
3/15
ROG. Red Tag Furniture made a partial payment of
$15,000
on April 27.
a. What is the net amount due?
b. What is the net date?
26. City Cellular purchased
$28,900
in cell phones on April 25. The terms
of sale were
4/20
,
3/30
,
n/60
. Freight terms were F.O.B. destination.
Returned goods amounted to
$650
.
a. What is the net amount due if City Cellular sends the manufacturer
a partial payment of
$5,000
on May 20?
b. What is the net date?
c. If the manufacturer charges a 4
1
2
% late fee, how much would City
Cellular owe if it did not pay the balance by the net date?
35
Percent
When cell phones passed landlines in use in U.S. homes.
households
Source: National Center for Health Statistics
0
2005 2006 2007 2008
85461_ch07_hr_189-228_2.indd 218 9/23/15 4:40 PM
seCtIon IV • CASH DISCOUNTS AND TERMS OF SALE 219
Business Decision: The employmenT TesT
27. As part of the employment interview for an accounting job at Sound Design, you have been
asked to answer the questions below, based on an invoice from one of Sound Design’s vendors,
Target Electronic Wholesalers.
a. Extend each line and calculate the merchandise total and the total amount of the invoice,
b. What are the discount date and the net date if the shipment arrived on July 16?
c. While in transit, five Blu-ray players and four LCD TVs were damaged and will be returned.
What is the amount of the returned merchandise? What is the revised merchandise total?
d. What are the amount of the cash discount and the net amount due if the discount is taken?
e. If Sound Design sends in a partial payment of
$20,000
within the discount period, what is
the net balance still due?
TARGET
ELECTRONIC WHOLESALERS
1979 N.E. 123 Street
Jacksonville, Florida 32204
Sold to:
Stock # Description Unit Price Amount
Invoice Date:
Terms of Sale:
June 28, 20XX
3/15, n/30 ROG
Sound Design
480 McDowell Rd.
Phoenix, AZ 85008
85461_ch07_hr_189-228_2.indd 219 9/23/15 4:40 PM