After completing this chapter, students will be able to: Calculate single trade discounts with formulas and complements, explain the freight terms FOB shipping point and FOB destination, find list price when net price and trade discount rate are known, calculate chain discounts with the net price equivalent rate and single equivalent discount rate,. | Chapter Seven Discounts: Trade and Cash Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin LU 7-1: Trade Discounts—Single and Chain (Includes Discussion of Freight) Calculate single trade discounts with formulas and complements. Explain the freight terms FOB shipping point and FOB destination. Find list price when net price and trade discount rate are known. Calculate chain discounts with the net price equivalent rate and single equivalent discount rate. LU 7-2: Cash Discounts, Credit Terms, and Partial Payments List and explain typical discount periods and credit periods that a business may offer. Calculate outstanding balance for partial payments. Learning unit objectives Invoice 3 Trade Discount Amount & Net Price Formulas List price x Trade discount rate = Trade discount amount List price -- Trade discount amount = Net Price $5,678 -- 1, = $4, $5,678 x 25% = $1, 4 Freight Terms FOB Shipping Point - FOB Destination - . | Chapter Seven Discounts: Trade and Cash Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin LU 7-1: Trade Discounts—Single and Chain (Includes Discussion of Freight) Calculate single trade discounts with formulas and complements. Explain the freight terms FOB shipping point and FOB destination. Find list price when net price and trade discount rate are known. Calculate chain discounts with the net price equivalent rate and single equivalent discount rate. LU 7-2: Cash Discounts, Credit Terms, and Partial Payments List and explain typical discount periods and credit periods that a business may offer. Calculate outstanding balance for partial payments. Learning unit objectives Invoice 3 Trade Discount Amount & Net Price Formulas List price x Trade discount rate = Trade discount amount List price -- Trade discount amount = Net Price $5,678 -- 1, = $4, $5,678 x 25% = $1, 4 Freight Terms FOB Shipping Point - FOB Destination - FOB San Diego - buyer seller From Buyer Prospective From Seller Prospective buyer pays the freight cost the buyer in San Diego pays the freight seller pays the freight cost the seller in New Jersey pays the freight FOB New Jersey - 5 Complement Complement - The difference between the single discount rate and 100%. The complement is what percentage the buyer will pay. For example, if the trade discount is 25%, the complement is 75% (100% -- 25%). 75% Trade Discount Complement 25% 6 Single Trade Discount The price of a Macintosh computer is $2,700. The manufacturer offers a 40% trade discount. What are the trade discount amount (TDA) and the net price? TDA = $2,700 x .40 = $1,080 Net price = $2,700 -- $1,080 = $1,620 Using Complement: $2,700 x .60 = $1,620 7 Calculating List Price When Net Price & Trade Discount Rate Are Known List Price = Net Price . Complement of trade discount rate A Macintosh computer has a $1,620 net price and a 40% trade discount. What is the list price? 100% -- 40%
