Southern Maramag Colleges Module 4 BUSINESS MATHEMATICS

P2 South Pob., Maramag, Buk. BUYING AND SELLING

+63 953 255 9195
Name: ________________________________________________ Grade 11 Submission Date: ______________

Learning Outcomes
After going through this module, you are expected to:
1. Compute the net invoice price (NIP) using a single trade discount;
2. Compute for the NIP using a discount series;
3. Compute for a single equivalent discount rate for a discount series;
4. Compute for the NIP rate and obtain the NIP using the said rate.
5. Explain the meaning of different terms of sale;
6. Compute the deadline for discount period;
7. Compute for deadline for credit term;
8. Compute for cash discounts and net amount payable; and
9. Solve problems involving mortgages.

LESSON 1: TRADE DISCOUNTS

Trade discounts - a reduction from the list price granted to buyers. It could take the form of volume discounts
for large purchases, dealer’s or distributor’s discounts or special discounts granted at the discretion of the seller. Trade
discounts could either be a single discount or a series discounts.
Single Discount
Computing for discounts make use of basic percentage formula P= BR where B = Base, R = discount rate and P =
discount.
Discount = List Price x Discount Price
Example: Compute the discount for an item with a list price of ₱1 250.00 subject to a 15% discount. What is its net
invoice price?
Given: List Price = ₱1 250.00 Discount rate = 15%
Find: a Discount b. Net Invoice Price (NIP)
Solution: a. Discount = List Price x Discount Rate b. Net Invoice Price (NIP) = List Price – Discount
= ₱1 250.00 x 15% = ₱1 250.00 - ₱187.50
Discount = ₱187.50 NIP = ₱1 062.50

Series Discounts
Example: Compute for the discount and the net invoice price if an item listed at ₱1 125.00 is given a 10% and 5%
discount.
Given: List Price = ₱1 250.00 Discount rate = 10% and 5%
Find: a Discount b. Net Invoice Price (NIP)
Solution:
 Multiply the list price by the first discount rate.
 Then subtract the list price to the first discount.
 To get the second discount, multiply the difference between the list price and the first discount rate and the
second discount rate.
 Then deduct the second discount from the said difference to get the net invoice price.
List price ₱1 250.00
Less 10% (₱1 250 x 10%) 125.00 First discount
Difference ₱1 125.50
Less 5% (₱1 125.50 x 5%) 56.25 Second Discount
Net Invoice Price ₱1 068.75
Total Discount = First Discount + Second Discount
= ₱125.00 + ₱56.25
Total Discount = ₱181.25
ACTIVITY 1
Direction: Answer the following. Show your solution. Write your answer on a short bond paper.
1. A living room set worth ₱5 300.00 was granted a discount of ₱636.00. Find the discount rate, net invoice price
and net invoice price rate.
2. The net invoice price of a wall clock is ₱287.00. If the discount rate was 18%. Find the net invoice price rate, list
price and discount.
3. The net invoice price of a dining table is ₱6 187.50, representing 75% of the list price. Find the list price, discount
and discount rate.
4. A washing machine listed as ₱20 040.00 is granted 20%, 10% and 5% discounts. Find the net invoice price and
discount.

ACTIVITY 2
Direction: Complete the following table.

List Discount Rate Discount Net Invoice Price Net Invoice Price Rate
a. ₱158.75 5%
b. ₱865.00 12 ½%
c. ₱1 300.00 ₱104.00
d. ₱3 650.00 ₱803.00
e. ₱725.00 ₱522.00
f. ₱630.00 ₱582.75
g. 3% ₱945.75
h. 8% ₱1 104.00
i. ₱612.50 ₱5 512.50
j. ₱94.41 ₱430.09

LESSON 2 CASH DISCOUNTS

Cash discounts are recorded in the accounting records either as sales discounts in the books of the seller or
purchases discounts in the books of the buyers. These are deductions from the recorded from the net invoice prices.
These are also granted to buyers to encourage prompt payment of accounts.
Term of Sale or Purchase
Cash discounts – the sales discount granted by the seller to the buyer. For the buyer, it is his/her purchase discount.
n n
means that the buyer has to pay the net invoice price by the end of the month of purchase. means the buyer
eom 45
has 45 days from the date of purchase to pay his/her account. These terms do not grant cash discounts.
Example:
2 n
a. =
10 30
This is read as “two ten, n thirty”, which means the buyer gets 2% discount if he/she pays within 10 days from
invoice date. If the 10-day period has elapsed, the buyer will be given 30 days from the date of the invoice within which
to pay his/her account without additional charges. The 10-day period is called the discount period, and the 30-day
period is called credit period.
3 2 n
b. = = is read as “three ten, two fifteen, n sixty”. It means the buyer will be given 3% discount if he/she
10 15 60
pays within 10 days from the invoice date or 2% discount if she/he pays within 15 days from the invoice date or
if she/he failed to take advantage of the discounts being offered, she/he has to pay within 60 days from the date
of invoice.
Computing for Discount Period and Credit Period
To compute the deadlines for the discount and credit periods, here is the example:
2 n
1. Date of Invoice: March Term: ,
10 30
a. To solve for the deadline for the discount period, we count 10 days from March 2, we get March 12:
 Date of invoice March 2
Discount Period 10 days
Deadline for the discount period March 12
b. To solve for the deadline for the credit period, we count 30 days form March 2. We cannot simply add 30 + 2
since the most number of days in a month is 31. As such, we do the following:
March has 31 days
Less invoice date 2
No. of days in March 29
April 1 Deadline for the credit period
Credit period 30
We first deduct the invoice date from the number of days in March which is 29. Then, we subtract 29 from 30 to
get April 1, the deadline for the credit period.
If the buyer pays between March 2 and March 13 that is, up to March 12, he/she gets the 2 % discount. If he/she
pays on March 13 or later, he/she gets no discount because the discount period has lapsed. To pay the account, the
buyer has until April 1, the deadline for the credit period.
Computing for Cash Discounts
To compute for cash discounts, simply multiply the net invoice price by the cash discount rate.
Example: Net invoice price: ₱3 060
Invoice date: March 2
3 n
Term: =
15 60
Find: a. Cash discount b. Net amount due
Solutions:
a. Cash discounts = NIP x Cash Discount rate b. Net amount due = NIP – Cash discount
= ₱3 060 x 2% = ₱3 060 - ₱61.20
= ₱61.20 = ₱2 998.80
To check, if cash discount rate is 2 %, the net amount due will represent 98% (100% - 2%); hence, the net mount
due = NIP x 98% = ₱3 060 x 8% = ₱2 998.80
It implies that if the buyer pays not later than March 12 then he/she pays only ₱2 998.80 instead of ₱3 060.00.
Beyond March 12, he/she pays the ₱3 060.

ACTIVITY 3
A. Direction: Find the cash discount and net amount due if the following invoices are paid within the discount
period. Use a separate sheet for your computation.
Net Invoice Price Terms of Payment Cash Discount Net Amount Due
a. ₱3 265.00 3 n
,
10 30
b. ₱1 324.50 2 n
,
15 60
c. ₱985.00 3 n
,
5 15
d. ₱266.50 1 n
,
15 45
e. ₱839.75 3 n
,
30 90
B. Direction: Find the cash discount and net amount due for the following cases. Use a separate sheet for the
computation.
Invoice Amount Invoice Date Terms of Payment Date Cash Discount Net Amount Due
Payment
a. ₱1 675 Jan. 15 1 n January 28
,
15 45
 b. ₱645 Feb. 25 2 n March 6
,
10 30
c. ₱895 March 12 3 n April 26
,
10 45
d. ₱785 Apr. 22 2 1 n May 7
, ,
10 15 60
e. ₱576 May 28 3 2 n June 12
, ,
15 20 90

C. Answer the following.

ABC Enterprises purchased veterinary supplies from XYZ Commercial. The total invoice price of the supplies bought
3 2 n
amounted to ₱25 859. The term of payment written on the invoice is , and . The invoice date is March 15,
10 15 60
2011.
a. Find the deadline for the 3% discount.
b. Find the deadline for the 2% discount.
c. Find the deadline for the credit period.
d. How much will ABC Enterprises pay if it pays within the 3% discount period?
e. How much will ABC Enterprises pay if it pays within the 2% discount period?

LESSON 3: MORTGAGES
Mortgage- the biggest loan can have. It is usually obtained for a house, a house and lot or for a machinery/ equipment.
Down Payment and Mortgage Loan
Mortgage loan is when you use your property as collateral for a loan from a financial institution. The down
payment is usually a certain percent of the purchase interest price of the property. This is generally called the buyer’s
entity.
Example: assume that you wish to purchase a secondhand car worth ₱312 500.00 and the seller requires a 20% down
payment. To compute for the down payment:
Down payment = Purchase price x Down payment %
= ₱312 500.00 x 20%
Down payment = ₱62 500
Mortgage loan = Purchase Price – Down payment
= ₱312 500.00 - ₱62 500
Mortgage loan = ₱250 000

Term of the Loan; Total Number of Payments

Amortization – the instalment payment on the loan
Amortization table - a table or chart showing each monthly payment on an amortizing loan indicating how much of each
payment goes to interest and how much goes to principal. It is the schedule prepared showing the installment payments
for the period of payment. The amortization table generally applies to fixed mortgages/loans. Myamortizationchart.com
is website that helps people in preparing an amortization table.
Example: Assume that you have to make one payment per month for 30 years. Thirty years is the term of the loan.
30 years x 12 months per year = 360, you have to make 360 monthly payments to be able to fully pay your loan.

Monthly Payment
Divide the loan amount by the number of payments (₱250 000.00/360 = ₱694.44). Assume that the bank will
charge you 5% annually. The 5% is what is termed as the annual percentage rate/APR. Since you are to make monthly
payments, we have to convert the 5% APR to a monthly rate. We divide 5% by 12 to get 0.41667% (5% /12 = 0.416%). To
determine the monthly payment, we use the following formula:

where A is the monthly payment;

 P is the loan’s initial amount;
i is the monthly interest rate;
n is the total number of payments.
Example: A = (0.00416)(₱250 000) x (1 + 0.00416)360
(1 + 0.00416) 360 - 1
= ₱1 342.05

Example Partial Monthly Amortization Schedule

Payment Amount Principal Interest Balance
1 ₱1 342.05 ₱300.39 ₱1 041.67 ₱249, 699.61
2 ₱1 342.05 ₱301.64 ₱1 040.42 ₱249.397.97
3 ₱1 342.05 ₱302.90 ₱1 039.16 ₱249.095.08
4 ₱1 342.05 ₱304.16 ₱1 037.90 ₱248, 790.49
356 ₱1 342.05 ₱1 314.44 ₱27.61 ₱5 312.76
357 ₱1 342.05 ₱1 319.92 ₱22.14 ₱3 992.84
358 ₱1 342.05 ₱1 325.42 ₱16.64 ₱2 667.43
359 ₱1 342.05 ₱1 330.94 ₱11.11 ₱1 336.49
360 ₱1 342.05 ₱1 336.49 ₱5.57 ₱0.00

ACTIVITY 4
Direction: Write your answer in a short bond paper.
1. Go to https://support.microsoft.com/en-us/kb/816643 and prepare an amortization schedule following the
steps given for a ₱2 500 000.00 mortgage loan at an APR of 6% for a term of 30 years.
2. Go to http://www.myamortizationchart.com/articles/how-is-an-amortzation-schedule-calculated/. Did you get
the same result as in (1) above.
ACTIVITY 5
Direction: Solve the following. Write your answer on a short bond paper.
1. The cash price of a dining room set is ₱1 920.00. James buys it on an instalment basis. He pays 12 monthly
instalment of ₱174.40.
a. What is the total amount he paid?
b. How much finance charge did he pay?
2. A brand new car has a list price of ₱850 000.00. The car dealer is giving a trade discount of 10% and requires a
20% down payment. The car dealer has an arrangement with a bank to finance the balance on the car. The term
of the loan is 5 years. The bank is charging an interest of 6% per annum.
a. Compute the net invoice price of the car.
b. Compute the down payment needed and the balance that will have to be financed by the bank.
c. How much will the monthly payment be? What portion of the monthly payment for the first month will go to
interest and to principal? What about for the second monthly payment?
d. Prepare an amortization schedule manually for the first half of the first year on a separate sheet.
e. Using Excel/Word, prepare the amortization schedule for the first half of the first year.

ACTIVITY 5 My Reflection
Direction: Write at least 3-5 sentences of what you have learned from these lessons.
Start with,
In this module , I have learned that ….
Reference:
Mariano, N. (2016). Business Mathematics. First Edition. Manila, Philippines: Rex Book Store. pp 65 -89.

Prepared by: Roselle S. Villaquer

Contact details: 09107969153/rvillaquer@gmail.com