Computing the Cash Price with an End-of-Month (EOM) Dating Discount
Instead of ordinary dating, some suppliers use end-of-month dating (EOM) when granting cash
discounts. With this method, customers (or buyers) receive a cash discount if they pay within a certain number of
days after the end of the month. The full amount is usually due 20 days after the last day for
taking the discount. With EOM dating, it is common to grant a 1-month extension on invoices
dated on or after the 26th of the month.
Example: Find the cash price.
Zoho Appliances received an invoice from its supplier. The net total for a Super Freezer was
$1,075 and payment terms stated 2/10 EOM. The invoice was dated 3/15. What is the cash price
of the super freezer if Zoho Appliances pays on 3/9?
The answer is as follows:
- Find the cash discount. Cash Discount = Net Price × Cash-Discount Rate = $1,075 × 2% = $21.50
- Find the cash price. Price = Net Price − Cash Discount = $1,075 − $21.50 = $1,053.50
Practice: Find the last date to take the discount, the last date to pay the invoice, the cash discount, and
the cash price.
|Invoice Date ||Terms ||Last Date to Take Discount ||Last Date to Pay Invoice||Paid Date ||Net Price||Cash Discount ||Cash Price
|3/15 ||3/10 EOM ||??? ||???||3/22 ||$590||??? ||???
|4/15 ||2/15 EOM ||??? ||???||5/10 ||$870||??? ||???
|5/15 ||1/10 EOM ||??? ||???||5/22 ||$790||??? ||???
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Date of last modification: March 5, 2019