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Mathematics of Buying

Mathematics of Buying. Cash Discounts: Other Methods. Objective. Solve Cash Discount Problems with EOM dating. Objective 1. End-of-Month Dating. Cash discount method End-of-Month (EOM) proximo. 3/10 EOM. 3/10 prox.

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Mathematics of Buying

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  1. Mathematics of Buying Cash Discounts: Other Methods

  2. Objective Solve Cash Discount Problems with EOM dating.

  3. Objective 1 End-of-Month Dating • Cash discount method • End-of-Month (EOM) • proximo 3/10 EOM 3/10 prox. 3% discount on invoice if payment is made by the 10th of the month that follows sale.

  4. Jan. 14 Jan. 31 Feb. 10 Feb. 28 Mar 2 End-of-Month Dating 1 of 2 • Invoice is dated January 14. • Terms are 2/10 EOM • Final Discount date = _______ • Net Payment date = _______ Feb. 10 Mar. 2 10 20 18 2

  5. Practice • Ch 6, Section 4 • Page 263 • # 4 • *Ch 6 Test • Page 271 • #5, 7

  6. Apr 26 Apr 30 May 31 June 15 June 30 July 5 End-of-Month Dating 2 of 2 If invoice is dated the 26th or later an extra month is added. Then count-off the 15 days… • Invoice is dated April 26. • Terms are 3/15 EOM • Final Discount date = _______ • Net Payment date = ________ June 15 July 5 15 20 15 5

  7. Objective 1 End-of-Month Dating: Summary • EOM Dating • Final Discount Date is determined by counting from the end of the month of the invoice date. • When the invoice is dated on the 26th or later, an extra month is added. • The Net Payment Due Date is 20 days after the last discount date.

  8. May 17 May 31 June 15 June 30 July 5 Proximo • Invoice Amt: $356.20 • Invoice Date: May 17 • Terms: 3/15 prox. • Date Invoice is paid: June 12 • Amount of Discount = ________ • Net due date = ________ • Amount Due (if disc. earned) = ________ June 15 July 5 $356.20 x .97 =$345.51 15 20 15 5

  9. Objective Receipt of Goods Dating

  10. Feb 20 Feb 5 Feb 28 Mar 12 ROG • Determine the final discount date for this problem. • Invoice Date: Jan. 15 • Terms: 3/15 ROG • Good Received on: Feb. 5 • Final discount date = ________ • Net payment due date = ________ Feb. 20 Mar. 12 15 20 12 8

  11. Sept. 3 July 25 July 31 Aug 31 Aug 14 ROG • Invoice Amt: $682.28 • Invoice Date: June 4 • Terms: 3/20 ROG • Delivery Date: July 25 • Date Invoice is paid: August 10 • Amount of Discount = __________________ • Amount Due = _______________________ • Extra: Net Payment Due Date = _____________ $682.28 x 2% = $13.65 $682.28 - $13.65 = $668.63 Sept. 3 20 6 14 20 3 17

  12. ROG Summary • Receipt of goods method is used when shipping times are longer. • Final discount date is set based upon when the merchandise is received, not the invoice date. • Net payment due date is 20 days after the final discount date.

  13. Practice • Ch 6, Section 4 • page 263 • #6 • Ch 6 Test • page 271 • #6

  14. Objective Extra Dating Method

  15. Objective 3 Extra Dating Method • Extends the discount period. • Used as an incentive during a slow sales season. • Used to gain a competitive sales advantage. 2/10-50 extra 2/10-50 ex. 2/10-50 x

  16. Nov 22 Nov 30 Dec 31 Jan 31 Jan 11 Dec 22 Dec 2* Extra Dating 1 of 2 • Invoice Date: Nov 22 • Terms: 1/10-20 x • Final Discount Date = ________ • Net Payment Date = ________ Dec. 22 Jan. 11 10 8 2 20 20 9 11

  17. Apr 12 Apr 30 May 31 June 30 July 6 Apr 27* June 16 Extra Dating 2 of 2 • Invoice Date: April 12 • Terms: 3/15-50 ex. • Final Discount Date = ________ • Net Payment Date = ________ June 16 July 6 15 50 3 31 16 20 14 6

  18. Practice • Ch 6, Section 4 • page 263 • #3, 5 • Ch 6 Test • page 271 • #8

  19. Practice • Ch 6, Section 4 • Determine discount and amount due • Page 263 • #9 – 13 • Application Problems • Pages 264 – 265 • #18 – 20, 25, 26

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