Theory question 108
Purchase and Sale of GoodsCommerce 2 (essay)
(a) Write in full the following abbreviations as used in commerce:
(i) COD;
(ii) CIF;
(iii) FOB;
(iv) E. and O. E.
(b) The sale of consumer goods costing ₦100,000 attracts a cash discount of 7½% and a quantity discount of 5%. Calculate the:
(i) value of the quantity discount;
(ii) value of the cash discount;
(iii) net amount of money payable by the buyer.
Show the model answer
(a)(i) COD – Cash on Delivery.
(ii) CIF – Cost, Insurance and Freight.
(iii) FOB – Free on Board.
(iv) E. and O. E. – Errors and Omissions Excepted.
(b)(i) Quantity discount = 5% × 100,000 = ₦5,000.
(ii) Amount after quantity discount = ₦95,000; cash discount = 7½% × 95,000 = ₦7,125.
(iii) Net amount payable = 95,000 − 7,125 = ₦87,875.
Take the quantity discount first, then the cash discount on the reduced amount.