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Business Math: Ch. 7 LearnSmart

Terms in this set (29)

Match the type of discount to its definition.

1. Trade
2. Cash

A. A reduction off of the original price (not related to early payment).
B. A reduction off of the original price related to early payment.
1. = A.
2. = B.
The list price is $4,000 and the trade discount rate is 20%. What is the trade discount amount?

A. $4,000
B. $3,200
C. $800
D. $80
C. $800
The recommended price of a new Samsung television is $3,200. The price after discount is $2,400. Match each of the amounts and terms.

1. 25%
2. $800
3. $2,400
4. $3,200

A. Trade discount rate
B. Net price
C. List price
D. Trade discount amount
1. = A. Trade discount rate
2. = D. Trade discount amount
3. = B. Net price
4. = C. List price
The discount _____________ provides the seller flexibility in offering trade discounts to different retailers.
sheet
Brentco purchases goods from IBM FOB shipping point. Who pays the freight costs?

A. IBM
B. Brentco
B. Brentco
Grayco buys goods from Martin Wholesalers FOB shipping point. What is the effect of freight on the amount owed?

A. No effect
B. Increased
C. Decreased
B. Increased
Jensen Inc. purchased goods from Intel FOB shipping point. Who is responsible for the freight costs?

A. Jensen Inc.
B. Intel
A. Jensen Inc.
Match the terms to the definitions.

1. List price
2. Net price
3. Trade discount amount

A. The price after the trade discount has been applied.
B. The recommended selling price.
C. The amount of the discount
1. = B.
2. = A.
3. = C.
The complement of 25% is ______________%
75
Company A sells goods to Company B at a list price of $1,000 and a 30% trade discount. What is the complement rate?

A. 130%
B. 30%
C. 70%
D. 100%
C. 70%
List price is found by using which formula?

A. Net price / Complement of Trade Discount Amount
B. Net price / Trade Discount Rate
C. Net price / Complement of Trade Discount Rate
D. Net price / Trade Discount Amount
C. Net price / Complement of Trade Discount Rate
10/20/5 is an example of a ______________ discount.
series
T/F: Before applying chain discounts to the list price, the discounts should not be combined by addition.
True
Order the steps for calculating the net price using net price equivalent rate.

1. Multiply the decimals to find the net price equivalent rate.
2. Find the complement of each discount in the series, and convert to decimal numbers.
3. Multiply the net price equivalent rate by the list price
2. Find the complement of each discount in the series, and convert to decimal numbers.
1. Multiply the decimals to find the net price equivalent rate.
3. Multiply the net price equivalent rate by the list price
Given the chain discount of 5/8/20, the single equivalent discount rate is:

A. .001
B. .3008
C. .6992
.95 x .92 x .8 = .6992
1 - .6992
B. .3008
Given the chain discount 15/25/20, match the figure to the term.

1. .51
2. .49

A. Net price equivalent rate
B. Single equivalent discount rate
1. = A.
2. = B.
On May 1 Vanderbilt Inc., purchased $5,000 in goods with trade discounts of 10/15/20, and terms 2/10, n/30 ROG. Vanderbilt received the goods on June 1. If payment is made on June 30, how much with the payment be?

A. $3,366
B. $5,000
C. $3,298.68
A. $3,366

(They missed the cash discount date; therefore, they must pay the net price)
Order the steps for calculating partial payments and outstanding balances.

1. Divide partial payments by the complement of the discount rate.
2. Subtract the credited amount from the total amount owed.
3. Calculate the complement of the discount rate
3. Calculate the complement of the discount rate
1. Divide partial payments by the complement of the discount rate.
2. Subtract the credited amount from the total amount owed.
Match the terms to the respective definitions.

1. Credit period
2. Discount period
3. Cash discount

A. The reduction in price that the seller extends to the buyer for early payment of the amount owed.
B. The time period that the seller extends to the buyer in which to pay the amount owed.
C. The time period that the seller extends to the buyer in which to receive a price reduction for early payment of the amount owed.
1. = B.
2. = C.
3. = A.
Given ordinary dating terms 2/10, n/30 and an invoice date of October 15. Identify the end of the discount period.

A. October 15
B. October 25
C. November 14
B. October 25
Cash discounts are taken on:

A. sales tax
B. trade discounts
C. net invoice price
D. freight
E. returned goods
C. net invoice price
Sellers typically extend credit for how long?

A. all of the above
B. 60 days
C. 30 days
D. 90 days
A. all of the above
Match the credit term to the discount dating method.

1. Ordinary dating
2. ROG
3. EOM

A. The discount period begins the first day to the month following the invoice date if received by the 25th of the month.
B. The discount period begins with the date that the goods are received.
C. The discount period begins with the invoice date.
1. = C.
2. = B.
3. = A.
Given the ordinary dating terms 2/10, n/30 match the item to the term.

1. 2
2. 10
3. 30

A. Discount rate
B. Credit period
C. Discount period
1. = A.
2. = C.
3. = B.
Franklin Company purchased goods on April 22 with terms 2/10, n/60. Franklin Company received the goods on April 30. Match the ROG terms to the respective definitions.

1. April 22
2. April 30
3. May 10
4. June 29

A. invoice date
B. Receipt of goods date
C. end of discount period
D. end of credit period
1. = A.
2. = B.
3. = C.
4. = D.
Benson Equipment purchased goods on September 3 with cash terms of 1/10 EOM. They received the goods on September 24. What is the end of the credit period?

A. November 30
B. October 24
C. September 24
D. October 30
E. October 3
D. October 30
Lincoln Inc., sold goods to Douglass Company on April 9 with the terms 2/10 EOM. Franklin COmpany received the goods on April 30. Match the dates to the respective terms.

1. April 9
2. May 10
3. May 30

A. invoice date
B. end of credit period
C. ed of discount period
1. = A.
2. = C.
3. = B.
______________ purchase goods from manufacturers and wholesalers and then sell these goods to the end-customer.
Retailers
Manufacturers and ____________ sell to ____________ who sell to the end-user customer.
wholesalers / retailers
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