Computing the Cash Price with an Ordinary Dating Discount
The computing the cash price with an ordinary dating discountconcept is explained as follows:
An invoice gives the details of each purchase made from a supplier.
As an incentive to pay early, the supplier may offer a cash discount if the bill is paid within a certain number of days.
The exact terms of the discount are stated on the invoice. Many suppliers use ordinary dating.
If the invoice says 3/10, net 30 (or 3/10, n/30), that means there is a 3 percent cash discount if
paid within 10 days and the net price must be paid within 30 days.
Example: Find the cash price.
Zoho Appliances received an invoice from its supplier. The net total for a super freezer was
$1,175 and payment terms stated 2/15, net 30. What is the cash price of
the super freezer if Zoho Appliances pays within 15 days?
- Find the cash discount. Answer = $1,175 × 2% = $23.50
- Find the cash price. Answer = Cash Price = Net Price − Cash Discount OR Cash Price = Net Price × Complement of Cash-Discount Rate
- Cash Price = $1,175 − $23.50 = $1,151.50
Practice: Find the last date to take the discount, the last day to pay the invoice, the cash discount, and the
|Invoice Date ||Terms ||Last Date to Take Discount ||Last Date to Pay Invoice||Paid Date ||Net Price||Cash Discount ||Cash Price
|4/15 ||3/10,n/30 ||??? ||???||4/21 ||$391||??? ||???
|2/7 ||2/15,n/30 ||??? ||???||2/17 ||$510||??? ||???
|3/15 ||1/10,n/30 ||??? ||???||3/21 ||$990||??? ||???
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Date of last modification: March 5, 2019