Theory question 110
Purchase and Sale of GoodsCommerce 2 (essay)
(a) Write the following abbreviations in full:
(i) C.O.D;
(ii) C.I.F;
(iii) F.O.B,
(iv) E. and O.E.
(b) The sale of a consumer good costing N100,000 attracts a cash discount of 5% and a quantity discount of 5%. You are required to calculate
(i) quantity discount value;
(ii) cash discount value;
(iii) net amount of money payable by the customer.
Show the model answer
Model answer
(a)(i) Cash on Delivery; (ii) Cost, Insurance and Freight; (iii) Free on Board; (iv) Errors and Omissions Excepted.
(b)(i) Quantity discount = 5% × 100,000 = N5,000.
(ii) Balance 95,000; cash discount = 5% × 95,000 = N4,750.
(iii) Net payable = 100,000 − 5,000 − 4,750 = N90,250.
Explanation
Take the quantity discount first, then the cash discount on the balance.