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Planning Ahead Inventory is an important part of many businesses.

Planning Ahead Inventory is an important part of many businesses. 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.

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Planning Ahead Inventory is an important part of many businesses.

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  1. Planning Ahead Inventory is an important part of many businesses. Can you think of problems that might arise from having too much or too little of a product in stock?

  2. Lesson Objective Calculate the cash price when the discount is based on end-of-month dating. Content Vocabulary 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. • end-of-month dating

  3. 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?

  4. Example 1 (cont.)

  5. Example 1 Answer: Step 1 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.

  6. Example 1 Answer: Step 2 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

  7. Example 1 Answer: Step 3 Find the cash discount. Net Price ×Cash-Discount Rate $727.05 ×4% = $29.082 or $29.08

  8. Example 1 Answer: Step 4 Find the cash price. Net Price – Cash Discount $727.05 – $29.08 = $697.97

  9. Example 2 It is a common business practice to grant a one-month 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.

  10. Example 2 Answer: Step 1 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.

  11. Example 2 Answer: Step 2 Find the complement of the cash-discount rate. 100% – 2% = 98%

  12. Example 2 Answer: Step 3 Find the cash price. $8,100 ×98% = $7,938

  13. 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

  14. Practice 1 Answer Last day a discount can be taken: July 10 Last day to pay the invoice: July 30

  15. 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

  16. Practice 2 Answer $1,280.95

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