Question

A. Black has received an invoice for $500 subject to trade discounts 10% 20%. A cash discount with terms 4/15, n/30. Find the discount rate when, A. Black pays the bill within the discount period.

I am kinda confused on how to apply the 10% and 20% discounts

Answer 1

Invoice amount = 500

Less : trade discount 10% -50

(500*10%)

___________________________

Net 450

less : trade discount 20% -90

_________________________

Purchase price 360

_________________________

Terms of payment is  4/15, n/30.

It means 4% discount rate is applicable if paid within 15 days. Otherwise invoice is payable by 30 days.

So to avail 4% discount, Purchase price will be paid in discount period of 15 days

So discount rate is 4% if paid within discount period.

Note : answer is 4% only. above calculation shown as to clear your concept. Please comment if any query. Please thumbs up my response