```Planning Ahead
Inventory is an important part
Can you think of problems
that might arise from having
too much or too little of a
product in stock?
Lesson Objective
Calculate the cash price when the discount is based on
end-of-month dating.
Content Vocabulary
end-of-month dating
end-of-month dating
Terms of payment on an invoice from
a supplier which grants a cash
discount if a bill is paid within a certain
number of days after the end of the
month when the invoice is issued.
Example 1
Bob’s Drugstore received the invoice below from
General Wholesalers.
What is the last day that Bob’s can take advantage
of the 4 percent cash discount?
What is the last day to pay the invoice?
What is the cash discount?
What is the cash price?
Example 1 (cont.)
Find the last day a discount can be taken.
Date of invoice: July 12.
Terms: 4/10 EOM
Discount can be taken until August 10, 10
days after the end of July.
Find the last day to pay the invoice.
Terms: 2/10 EOM.
The full amount is due 20 days after the
discount date.
August 10 + 20 = August 30
Find the cash discount.
Net Price × Cash-Discount Rate
\$727.05 × 4% = \$29.082 or \$29.08
Find the cash price.
Net Price – Cash Discount
\$727.05 – \$29.08 = \$697.97
Example 2
It is a common business practice to grant a onemonth extension on invoices dated on or after the
26th of the month. An invoice dated November 27
has terms of 2/10 EOM. Net price is \$8,100. The
invoice is paid January 9.
What is the last day the 2 percent cash discount can
be taken and the last day to pay the invoice? Find
the cash price using the complement method.
Find the last day a discount can be taken.
Date of invoice: November 27th, which is after
the 26th, thus a 1-month extension is granted.
A 1-month extension means the discount can
be taken until January 10, 10 days after the end
of December.
The invoice must be paid after the end of
December.
Find the complement of the cash-discount
rate.
100% – 2% = 98%
Find the cash price.
\$8,100 × 98% = \$7,938
Practice 1
Find the last day a discount can be taken
and the last day to pay the invoice.
Date of invoice: May 26
Terms: 2/10 EOM
Last day a discount can be taken: July 10
Last day to pay the invoice: July 30
Practice 2
Find the cash price using the complement
method.
Net price: \$1,280.95
Terms: 3/10 EOM
Invoice date: August 11
Invoice paid: August 30
\$1,280.95
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