(a) Write the following commercial abbreviations in full: (i) C.OD (ii) C.I.F (iv) E & O.E (b) The sale of a good costing Le100,000 attracts a trade discoun...

Answer Details

(a) Commercial abbreviations in full

• C.O.D = Cash On Delivery (payment is made when the goods are delivered).
• C.I.F = Cost, Insurance and Freight (the price quoted covers the cost of the goods, insurance and freight to the buyer's port).
• E & O.E = Errors and Omissions Excepted (the seller reserves the right to correct any mistakes made on the invoice).

(b) Discount calculations

Cost of goods = Le100,000. Trade discount = 5%, cash discount = 5%.

(i) Trade discount value

Trade discount is calculated on the cost price.

\[ \text{Trade discount} = \frac{5}{100} \times 100{,}000 = Le5{,}000 \]

(ii) Cash discount value

Cash discount is calculated on the amount remaining after deducting trade discount.

\[ \text{Invoice price} = 100{,}000 - 5{,}000 = Le95{,}000 \]

\[ \text{Cash discount} = \frac{5}{100} \times 95{,}000 = Le4{,}750 \]

(iii) Net amount payable by the buyer

\[ \text{Net amount} = 95{,}000 - 4{,}750 = Le90{,}250 \]

The buyer therefore pays Le90,250.