Sample 1  Task 4
HH_
Registered Posts: 3
Hi,
Is anyone able to explain the answer for Period 5 using option 1 and 2. The answer shows option1: 542000 and option 2: 553500.
Many thanks in advance.
Is anyone able to explain the answer for Period 5 using option 1 and 2. The answer shows option1: 542000 and option 2: 553500.
Many thanks in advance.
0
Comments

Hello, I am still confused on how to work out the above, if anyone is able to help that would be great. Thanks0

I know this post was a while ago, but I thought I would comment to explain for anybody else:
Period 5:
Option 1  10% discount
So the 42,000 x £10 x 0.90 =378,000 (All paid in Period 5)
Period 4: As the new discount starts from Period 4 onwards this is all paid in Period 4
The remaining balance of 40% from Period 3 paid in Period 5 = 164,000
164,000 + 378,000 = 542,000
Option 2: 5% discount 50% paid in month of purchase
Period 5 payments
Period 3  still original timing of receipts = 40% 164,000 balance paid Period 5
Period 4  50% at discounted paid in Period 5 (40,000 x £10 x 0.95) = 380,000
50% Period 4 paid in Period 5 = 190,000
Period 5 sales = 42,000 x £10 x 0.95 = 399,000
50% paid in period 5 = 199,500
Period 5 total payments = 164,000 + 190,000 + 199,500 = 553,500
Hope I have explained this okay!1 
Hi,
I am sitting exam this Friday for second time, and i do understand slightly your explanation above, however sometimes it is like head against the wall.
Could you please explain more detailed?0 
Step by step.g_anastasija said:
Could you please explain more detailed? Period 4 onwards, McCaw Ltd has decided to change the payment terms.
 Now the question requires you to work out how much would Conrad Ltd pay McCaw Ltd during the period 5 based on the forecast units?
 You have to note that the payment terms hasn’t changed for period 3, which means the payment to be made for that period is still under old payment terms.
 The old payment terms is that the company pays 20%, 40% and another 40% split between three periods.
 Option 1: (10% discount) Period 5 will have 100% of period 5 + period 3’s balance 40% (Guess why period 4 is not here?)
 Option 2: (5% discount) Period 5’s 50% + Period 4’s 50% + Period 3’s balance 40%.
1  Period 4 onwards, McCaw Ltd has decided to change the payment terms.

Thank you very much @ncacat , your explanation is really helpful0
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