List Price (1 Trade Discount Rate)
List Price (1 Trade Discount Rate)
List Price (1 Trade Discount Rate)
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DISCOUNT
A discount is the amount deducted from the selling price of a product or service. There are two types of discounts:
trade and cash discounts.
1. Trade Discount - is the discount offered by a manufacturer or wholesaler to encourage resellers to
purchase a product and usually stated in a specific amount or percentage discount.
2. Discount Series - is a chain/multiple discount offered on the same item.
3. Cash Discount - is the discount given to persuade customers to pay in cash immediately or within a
specified time.
TRADE DISCOUNT
Trade discount is applied on the list price or price tag.
The price after deducting the trade discount is known as the net price or invoice price.
Or
Trade Discount Series is also called a multiple discounts/ chain discounts which means it involves more than
one trade discount and to solve for the net price of discount series, use the formula stated below.
Invoice Price = List Price [(1-1st Discount Rate) (1-2nd Discount Rate) (1-3rd Discount Rate)...]
Example:
1. Find the invoice price of a tablet that is listed at ₱ 7 999 and has a trade discount rate of 10%.
Answer: Therefore, after applying 10% trade discount rate on the list price, we obtained ₱ 7 199.10 as the
invoice price.
2. Find the invoice price of a smartphone listed for P 10 499 and has a trade discount series of 15%, 10%, 5%.
Given: List price = ₱ 10 499, Trade discount series = 15%, 10%, 5%
Asked: Invoice Price
Formula:
Invoice Price = List Price [(1-1st Discount Rate) (1-2nd Discount Rate) (1-3rd Discount Rate)...]
CASH DISCOUNT
Cash Discount is applied on the invoice price, the price after all trade discounts have been deducted.
TERMS OF PAYMENT
1. 10/15 (the customer will receive 10% discount if he/she pays within 15 days)
2. 5/30 (the customer will receive 5% discount if he/she pays within 30 days)
3. n/60 (the customer will pay the full net amount within 60 days and will not receive any discount )
Use the formulas below to solve for the Cash Discount and Selling Price (price after deducting the cash discount
availed by the customer).
Or
Example:
Braniac Enterprises received an invoice of P 7 500 for school supplies dated 4 July with terms of 5/15, n/30. If
the invoice is paid on 15 July, how much cash discount did Braniac Enterprises receive from the supplier? How
much should Braniac Enterprises pay?
Given: List Price = ₱ 7 500, Terms of payment = 5/15, n/30
Date: July 4- July 15, a discount of 5% will be given since the invoice was paid within 15 days.
Asked:
a. Cash Discount
b. Selling Price
Formula:
Cash Discount = Invoice Price x Trade discount rate
Selling Price = Invoice Price − Cash Discount
Solution:
Answer: Therefore, Braniac Enterprises will pay ₱ 7 125 after receiving a cash discount of ₱ 375.