1. Prepared by Johnny Howard © 2015 South-Western, a part of Cengage Learning

2. 7–2 © 2015 South-Western, a part of Cengage Learning

3. 7–3 © 2015 South-Western, a part of Cengage Learning to Compute Net Price with the Discount Method 1.Multiply the discount rate by the list price to get the discount amount: Discount = Trade discount rate × List price 2.Subtract the discount from the list price to get the net price: Net price = List price – Discount 1

4. 7–4 © 2015 South-Western, a part of Cengage Learning

5. 7–5 © 2015 South-Western, a part of Cengage Learning to Compute Net Price with the Complement Method 1.Subtract the discount rate from 100% to get the complement rate: Complement rate = 100% –Trade discount rate 2.Multiply the complement rate by the list price to get the net price: Net price = Complement rate × List price 1

6. 7–6 © 2015 South-Western, a part of Cengage Learning

7. 7–7 © 2015 South-Western, a part of Cengage Learning in Computing a Series of Trade Discounts 1.Apply the first discount rate to the list price. 2.For subsequent discounts, compute intermediate prices and then apply the discount rates to them. 3.If the buyer does not need to know all of the intermediate prices, an efficient shortcut is to multiply the list price by all of the complement rates successively. 2

8. 7–8 © 2015 South-Western, a part of Cengage Learning

9. 7–9 © 2015 South-Western, a part of Cengage Learning to Compute the Equivalent Single Discount Rate 1.Compute the complement of each rate. 2.Multiply all the complement rates (as decimals), and then write the product as a percent. 3.Subtract the product (Step 2) from 100% to get the equivalent single discount rate. 3

10. 7–10 © 2015 South-Western, a part of Cengage Learning

11. 7–11 © 2015 South-Western, a part of Cengage Learning to Compute the Remittance 1.Multiply the discount rate by the net purchase amount to get the cash discount: Cash discount = Discount rate × Net purchase amount 2.Subtract the cash discount from the net purchase amount to get the remittance: Remittance = Net purchase amount – Cash discount 4

12. 7–12 © 2015 South-Western, a part of Cengage Learning Figure 7.1Sales Invoice

13. 7–13 © 2015 South-Western, a part of Cengage Learning Figure 7.2Cash Discount Time Line

14. 7–14 © 2015 South-Western, a part of Cengage Learning

15. 7–15 © 2015 South-Western, a part of Cengage Learning to Compute the Remittance When There Are Merchandise Returns and/or Freight Charges 1.Net purchase = Invoice amount – Merchandise returns – Freight 2.Cash discount = Discount rate × Net purchase 3.Cost of merchandise = Net purchase – Cash discount 4.Remittance = Cost of merchandise + Freight, if any 4

16. 7–16 © 2015 South-Western, a part of Cengage Learning

17. 7–17 © 2015 South-Western, a part of Cengage Learning to Compute the Remittance with the Complement Method 1.Net purchase = Invoice amount – Merchandise returns – Freight 2.Complement rate = 100% – Cash discount rate 3.Cost of merchandise = Net purchase × Complement rate 4.Remittance = Cost of merchandise + Freight, if any 4

18. 7–18 © 2015 South-Western, a part of Cengage Learning

19. 7–19 © 2015 South-Western, a part of Cengage Learning to Compute the Unpaid Balance 1.Compute the complement of the discount rate (100% – Discount rate). 2.Compute the amount credited by dividing the dollar amount paid (remittance) by the complement rate. 3.Compute the unpaid balance by subtracting the amount credited (Step 2) from the invoice amount. 5

20. 7–20 © 2015 South-Western, a part of Cengage Learning

21. 7–21 © 2015 South-Western, a part of Cengage Learning

22. 7–22 © 2015 South-Western, a part of Cengage Learning Chapter Terms for Review amount credited cash discount complement method complement rate discount date discount method discount period discount rate due date equivalent single discount rate invoice invoice date list price net price net purchase amount remittance series of discounts terms of payment trade discounts vendor

23. 7–23 © 2015 South-Western, a part of Cengage Learning Assignment 7.1: Trade Discounts A Problems 1–3: Find the dollar amount of the trade discount and the net price, using the discount method. Problems 4–6: Find the complement rate and the net price, using the complement method.

24. 7–24 © 2015 South-Western, a part of Cengage Learning Assignment 7.1: Trade Discounts B Find the amount of each discount in the given series of trade discounts. Then find the net price. Where a discount doesn’t exist, write a dash.

25. 7–25 © 2015 South-Western, a part of Cengage Learning Assignment 7.1: Trade Discounts C Find the complement rate for each discount in the given series of trade discounts. Then find the net price, using the complement method. Where a complement rate doesn’t exist, write a dash.

26. 7–26 © 2015 South-Western, a part of Cengage Learning Assignment 7.1: Trade Discounts D Find the complement rate for each discount in the given series of trade discounts. Then find the equivalent single discount rate, to the nearest 1/10 of a percent.

27. 7–27 © 2015 South-Western, a part of Cengage Learning Assignment 7.1: Trade Discounts E Solve each of the following business applications about trade discounts. Use either the discount method or the complement method.

28. 7–28 © 2015 South-Western, a part of Cengage Learning Assignment 7.2: Cash Discounts A For the following problems, find the discount date, the due date, the amount of the cash discount, and the amount of the remittance.

29. 7–29 © 2015 South-Western, a part of Cengage Learning Assignment 7.2: Cash Discounts A For the following problems, find the discount date, the due date, the amount of the cash discount, and the amount of the remittance. (cont’d)

30. 7–30 © 2015 South-Western, a part of Cengage Learning Assignment 7.2: Cash Discounts B For the following problems, find the discount date, the complement rate, and the amount of the remittance.

31. 7–31 © 2015 South-Western, a part of Cengage Learning Assignment 7.2: Cash Discounts C The following problems involve partial payments made within the discount period. Solve for the items indicated.