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Trade discount amount = List price – Net price Trade discount rate = Amount of trade discount List price Trade discount amount = 889.00 – 545.74 = 343.25 Trade discount rate = 343.25 = .3861 = 38.61% 889.00© 2009 Cengage Learning. 7– 16 Trade Discount–Series Chain, or series, trade discount Term used when a vendor offers a buyer more than one trade discount.Reasons for multiple discounts: Position or level in the channel of distribution Volume buying Advertising and display Competition© 2009 Cengage Learning. 7– 17 Trade Discount –Series Example Calculate the net price and trade discount amount for merchandise with a list price of ,000 less trade discounts of 10/15/25.Discounts and allowances are reductions to a basic price of goods or services.They can occur anywhere in the distribution channel, modifying either the manufacturer's list price (determined by the manufacturer and often printed on the package), the retail price (set by the retailer and often attached to the product with a sticker), or the list price (which is quoted to a potential buyer, usually in written form).
The account used to recognize the expense may be called "Sales Discount" or "Discount on Sales." The buyer treats such a discount as a reduction of the cost and uses the account called "Purchases Discount" or "Discount on Purchases." Let's see how the credit term of 2/10, n/30 works in an example. In the situation when the buyer is paying the account payable to Michael & Co Ltd.- to calculate, the retailer reduces the amount to the vendor for merchandise to make the vendor share the risks of selling to the consumer.Ex.- blazers and jackets - if there are no fillers to cordinate with the hard pieces, many consumers will not buy any of the availible merchandise at full price.Book a Tutor Become a Tutor Math Learning Centre Learning Strategies Learning Circles, Review Sessions & Open Tutoring9Tutoring Guidelines Practice and Review English Language Help Contact the Learning Centre Trade Discount Trade discount is applied on the List price. The value of trade discount depends on the rate of discount.The price after any trade discount is known as the Net price.