(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 N 100,...

(a) The abbreviations in full

• (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) Calculation

Cost of goods = N100,000. Trade practice is to deduct the quantity (trade) discount first, then calculate the cash discount on the reduced amount.

(i) Value of the quantity discount

\[ \text{Quantity discount} = 5\% \times N100{,}000 = \frac{5}{100} \times 100{,}000 = N5{,}000 \]

(ii) Value of the cash discount

Amount after quantity discount \(= 100{,}000 - 5{,}000 = N95{,}000\).

\[ \text{Cash discount} = 7\tfrac{1}{2}\% \times N95{,}000 = \frac{7.5}{100} \times 95{,}000 = N7{,}125 \]

(iii) Net amount payable by the buyer

\[ \text{Net amount} = 100{,}000 - 5{,}000 - 7{,}125 = N87{,}875 \]

The buyer therefore pays N87,875.