Question 1
CASH DISCOUNT is applied on the net price. It is a type of discount that is applied after
all trade discounts. Cash discounts largely depend on the terms and the date of
payment. The price after any cash discounts is called the selling price.
Given the following information:
Date of Invoice
November 18,
2017
Date of Goods
Delivered
November 28,
2017
Date of Goods
Received
December 12,
2017
Date of Payment
December 24,
2017
Terms
5/15, 2/30, n,60
Invoice amount
P50,000
REQUIRED: Identify the amount of discount if paid:
1. Within 1st discount period
2. Within 2nd discount period
3. After the discount period
4. If you were a company that is under debt financing*, how would you choose between
the three (3) periods?
*Debt financing means borrowing money and not giving up ownership. It often comes with strict conditions or covenants in addition
to having to pay interest and principal at specified dates.
Response: 1.) 50,000 X 5% = 2,500
2.)50,000 X 2% = 1,000
3.) 0 DISCOUNT
4.) I would choose the 5/15, because if i got the higher discount it would be benefit my
business. Higher discount means lower price of the product. If could get the product on
the lowest price, i can also sell it on a lower price. It will help my business to attract
more customers.