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A company is registered for VAT and purchase equipment from a supplier. The list price of the equipment is $12000 excluding 17.5% VAT. The company receives a 10% trade discount and a further 5% cash discount for paying in cash immediately. What is the total payable amount shown on the invoice?
I did this 12000* 10%=1200 12000-1200=10800*5%=540 10800-540=10260*17.5%=1795.5. (10260+1795.5)=12055.5
Invoices will take account of the trade discount (that’s just a cheap price offered eg for a bulk buy).
The net price of the goods is therefore 12,000 x 90% = 10,800.
VAT is calculated on the assumption that the cash discount is also taken, so the VAT amount will be 10,800 x 0.95 x 0.175 = 1,795.50
The total invoice value is therefore: 10,800 + 1,795.50 = 12,595.50
Note that the VAT is not calculated on the net amount shown on the invoice!
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