A retailer received an invoice dated 21 February 2023 worth RM4550 of goods that included a
prepaid freight cost of RM150. The invoice was offered trade discount of 20% and 10% and cash
discount terms of 8/10, 4/20, n/40.
a. Determine the single equivalent trade discount
b. Determine the trade discount amount
c. Determine the maximum cash discount amount.
d. Determine the last date to settle the payment
e. Determine the payment amount if retailer pays on 2 March 2023
f. Assume the retailer paid RM3000 on 12 March 2023 and the payment balance is paid on
16 March 2023. Find the payment balance amount.
a. Single Equivalent Trade Discount (SED):
SED = 1 - [(1 - 0.20)(1 - 0.10)]
SED = 1 - [(0.80)(0.90)]
SED = 1 - 0.72
SED = 0.28 or 28%
b. Trade Discount Amount:
Trade Discount Amount = RM4550 * 0.28
Trade Discount Amount = RM1274
c. Maximum Cash Discount Amount:
Cash Discount Amount = RM4550 * 0.08
Cash Discount Amount = RM364
d. Last Date to Settle Payment:
Last date to take advantage of the cash discount is 10 days from the invoice date.
Last Date = 21 February 2023 + 10 days = 3 March 2023
e. Payment Amount if Retailer Pays on 2 March 2023:
If the payment is made on 2 March 2023, the retailer can take advantage of the cash discount of 8%.
Payment Amount = RM4550 - RM364
Payment Amount = RM4186
f. Payment Balance Amount:
Payment made on 12 March 2023 = RM3000
Payment Balance = RM4550 - RM3000
Payment Balance = RM1550
Payment Balance Amount = RM1550 + (RM1550 * 0.04)
Payment Balance Amount = RM1550 + RM62
Payment Balance Amount = RM1612