Question 8
(a) Explain the following trade terms as written on an invoice
(i) 5% trade discount;
(ii) 10% cash discount;
(iii) 2% net 30days.
(b) The following information was extracted from the books of Dalempa limited as at 31st December, 2021.
₦
Stock (01/01/21) 30,000.00
Receivables 50,000.00
Overdraft 15,000.00
Cash at hand 40,000.00
Stock (31/12/21) 20,000.00
Cash at bank 25,000.00
You are required to calculate the following as at 31/12/21:
(i) current assets;
(ii) current liabilities;
(iii) working capital;
(iv) average stock.
Observation
The question was well attempted by many candidates and their performance was good.
The expected responses to the question include:
(a) Explanation of terms
- 5% trade discount is a reduction of 5% on the invoice value to allow the buyer to make profit.
- 10% cash discount is a reduction of 10% on the invoice value if the buyer pays cash.
N.B. Ignore 8(a)iii
