Part 223

SOLUTION: I must sell it for 100% of the cost plus 20% of the cost, or 120% of the cost.

120% of $3.50 = $4.20.

∴ I must sell it at $4.20.

EXAMPLE: I sold my carriage for 80% of its cost and received $90 for it. What was the cost?

SOLUTION:

1% of the cost is 1/80 of $90, or $1.125.

100% of the cost = 100 × $1.125, or $112.50.

COMMISSION

is a percentage paid for buying or selling real estate, goods, etc. A consignment is a quantity of goods, sent to an agent, broker or commission merchant, for sale. The consignor is the one who sends the goods, the consignee the one to whom they are sent.

PRINCIPLES:

1. _The commission is some number or per cent of the price of what is bought or sold._

2. _The proceeds equal the selling price minus the commission._

3. _The amount equals the selling price plus the commission._

Commission presents two classes of problems. One of these classes may be called “buying problems.” The other may be called “selling problems.”

BUYING PROBLEM: I sent my agent $1977.60 to _buy_ wild farm lands in northern Wisconsin, at $3 per acre. He was to receive 3% for his work. How many acres did he buy?

WORK AND EXPLANATION:

3% of $3 = $.09.

Cost to me of 1 acre is $3 + .09 = $3.09

For $1977.60 he buys as many acres as $3.09 is contained times in $1977.60, or 640. Hence, he buys 640 acres.

SELLING PROBLEM: My agent _sells_ 360 pounds of butter for me at 20 cents. He pays $4.20 freight charges and $9.60 for storage. His commission is 5%. What does he send me?

WORK AND EXPLANATION:

360 pounds at 20 cents = $72.00 Freight is $4.20 Storage is 9.60 Commission is 5% of $72, or 3.60 Total charges = 17.40 ------ He sends me the difference, or $54.60

TRADE DISCOUNT

is an allowance made by manufacturers and jobbers from their list or marking prices. When the market varies, they change the discount accordingly, or make several discounts instead of changing the list.

Trade discount is a certain per cent off, or from list or marking price; while profit and loss is computed on the cost or purchase price.

The amount of the discount allowed depends sometimes upon the amount of order, and sometimes upon the terms of settlement. Very often two or more discounts are deducted in succession. Thus, 10% and 5% off; or, as it is generally expressed in business, 10 and 5 off, means a discount of 10%, and then 5% from what is left; 20, 10, and 5 off, means three successive discounts. A retailer’s profit is smaller when he is allowed 10 and 5 off, than if he were allowed 15 off. The result is not affected by the order in which the discounts are taken.

EXAMPLE: I receive a bill of goods amounting to $100, 20% off. What is the net cost?

FIRST WAY:

20% of $100 =$20

$100 - $20 = $80

SECOND WAY:

100% - 20% = 80%

80% of $100 = $80

EXAMPLE: A merchant receives two bills of $200 each. On one there is a discount of 25%; on the other, 15% and 10%. What must he pay on each, net?

FIRST BILL:

100% - 25% = 75%, or 3/4

3/4 of $200 = $150.

SECOND BILL:

100% - 15% = 85%

100% - 10% = 90%

90% of 85% = 76.5%

.765 × $200 = $153.

PROMISSORY NOTES

A _note_ is a written promise to pay a specified sum at a certain time.

The person who promises is called the _maker_, and the person to whom he promises is called the _payee_.

The FACE of a note is the sum of money promised.

A _negotiable note_ is one which is made payable to the bearer, or to the order of the payee. A negotiable note can be sold or transferred.

A note is _non-negotiable_ when it is payable only to the person or persons named in the note.

An _indorser_ of a note is a person who writes his name on the back of it. The person who indorses, by so doing guarantees its payment. An _indorsement in blank_ is simply the signature of the indorser written across the back of the note or draft. When indorsed in this way the note or draft is made payable without further indorsement to any person holding.

A note or draft is _indorsed in full_ when the indorser states, over his signature, the person to whose order the note or draft is to be paid. If an indorser does not wish to guarantee the payment of a note or draft, he writes “Without recourse” over his name when indorsing it.

A _protest_ of a negotiable note or draft is a formal statement by a notary public that said note or draft was presented for payment or acceptance and refused.

A note, when due, must be presented at the place at which it is made payable. The _day of maturity_ is the day on which a note becomes due.

The _days of grace_ are the three days beyond the specified time for payment. Days of grace are now practically abolished throughout the United States.

KINDS OF NOTES.--There are three principal kinds of notes--_Time Notes_, _Joint Notes,_ and _Joint and Several Notes._

A _Time Note_ must be paid in a specified time.

A _Joint Note_ is one signed by two or more persons who are jointly liable for its payment.

A _Joint and Several Note_ is a note signed by two or more persons who are both jointly and individually liable for its payment. Each man who signs the note is as much responsible for the payment of the whole sum as if he had signed alone.

LEGAL RULES THAT APPLY TO NOTES

A note made out on _Sunday_ is void.

If a note does not state that _interest_ is to be paid, it does not bear interest until after it is due.

If anyone obtains a note _by fraud_ or from an _intoxicated person,_ he cannot collect.

_To be negotiable_ an instrument must be in writing and signed by the maker (of a note) or drawer (of a bill or check).

_It must contain_ an unconditional promise or order to pay a certain sum in money.

Must be payable on demand, or at a fixed future time.

Must be payable to order or to bearer.

In a bill of exchange (check), the party directed to pay must be reasonably certain.

Every negotiable instrument is presumed to have been issued for a valuable consideration, and want of consideration in the creation of the instrument is not a defense against a bona-fide holder.

_An instrument is negotiated_, that is completely transferred, so as to vest title in the purchaser, if payable to bearer, or indorsed simply with the name of the last holder, by mere delivery; if payable to order, by the indorsement of the party to whom it is payable and delivery.

One who transfers an instrument by indorsement warrants to every subsequent holder that the instrument is genuine, that he has title to it, and that if not paid by the party primarily liable at maturity, he will pay it upon receiving due notice of non-payment.

_To hold an indorser liable_ the holder upon its non-payment at maturity must give prompt notice of such non-payment to the indorser and that the holder looks to the indorser for payment. Such notice should be sent within twenty-four hours.

_When an indorser is thus compelled to pay_ he may hold prior parties, through whom he received the instrument, liable to him by sending them prompt notice of non-payment upon receiving such notice from the holder.

One who transfers a negotiable instrument by delivery, without indorsing it, simply warrants that the instrument is genuine, that he has title to it, and knows of no defense to it, but does not agree to pay it if unpaid at maturity.

_The maker of a note is liable_ to pay it, if unpaid at maturity, without any notice from the holder or indorser.

Notice to one of several partners is sufficient notice to all.

_When a check is certified_ by a bank the bank becomes primarily liable to pay it without notice of its non-payment, and when the holder of a check thus obtains its certification by the bank, the drawer of the check and previous indorsers are released from liability, and the holder looks to the bank for payment.

_A bona-fide holder_ of a negotiable instrument, that is, a party who takes an instrument regular on its face, before its maturity, pays value for it and has no knowledge of any defenses to it, is entitled to hold the party primarily liable responsible for its payment, despite any defenses he may have against the party to whom he gave it, except such as rendered the instrument void in its inception. Thus, if the maker of a note received no value for it, or was induced to issue it through fraud or imposition, that does not defeat the right of a bona-fide holder to compel its payment from him.

The dates and amounts of _partial payments_ on a note, before it is finally paid in full, are placed on the back.

The _place of payment_, if not mentioned, is at the maker’s place of business or residence, during reasonable business hours.

If a _note_ or a _check_ received in payment of a debt is _dishonored_, the debt revives.

_Ignorance_ of the law does not excuse anyone. No _contract_ is good unless there be a _consideration_. No consideration is good that is _illegal_.

The _maker_ of an _accommodation note_ is not bound to the person accommodated; but he is bound to any other person receiving the note for value.

BANK DISCOUNT

The sum charged by a _bank_ for cashing a note or time draft is called _bank discount_. This discount is the simple interest, paid in advance, for the number of days the note has to run. Wholesale business houses usually sell goods on _time_ and take notes from the retailers in payment. These notes are not often for a longer period than _three months_. Some are placed in the banks for collection, others are _discounted_. When a note is discounted at a bank the payee _indorses_ it, making it payable to the bank. Both maker and payee are then responsible to the bank for its payment. If the note is drawing interest the discount is reckoned on and deducted from the amount due at maturity. Most notes discounted at banks do not draw interest. The _time_ in bank discount is always the number of days from the date of discounting to the date of maturity.

EXAMPLE: A note of $250, dated July 7, payable in 60 days, is discounted July 7 at 6%; find the proceeds.

EXPLANATION: This note is due in 63 days, or September 8. The accurate interest of $250 for 63 days at 6% is $2.59. The proceeds, then, will be $250-$2.59, or $247.41.

The _Present Worth_ of a note or debt is a sum, which, if put at interest, will amount to that debt in the given time.

The _True Discount_ is the difference between the debt at maturity and its present worth.

REMEMBER:

1. _To allow three days of grace, if the debt discounted is a note._

2. _To add the interest due at maturity to the principal, before discounting, if the note bears interest._

EXAMPLES: Case I.--Note not bearing interest.

What is the present worth and true discount on a note of $200, if paid 6 months before due, the discount being 6%.

SOLUTION: Amount of $1 for 6 months at 6% = $1.03. If $1.03 = amount of $1, $200 is the amount of as many dollars as 200/1.03, or $194.17+.

$194.17 is the present worth. $200 - $194.17 = $5.83 true discount.

The following rule can be deduced from the foregoing solution:--

RULE: 1. _To find the present worth, divide the debt by the amount of $1 for the given time._

2. _To find the true discount, subtract the present worth from the debt._

Case II.--Note bearing interest.

What is the present worth of a note of $300, bearing 6% interest, due in 2 years 4 months, if money is worth 10%.

SOLUTION: Interest on $300 for 2 years 4 months at 6% = $42.

$300 + $42 = $342. Amount due at maturity.

Amount of $1 for 2 years 4 months at 10% = $1.23-1/3.

If $1.23-1/3 = amount of $1, then $3.42 is the amount of

342 $--------, or $277.29. 1.23-1/3

$277.29 = present worth.

INTEREST

If a person borrows money, he usually pays something for the loan.

The sum of money he borrows is called the _Principal_; the money he pays for the use of the principal is called _Interest_. Interest is generally reckoned at so much for the use of each $100 for one year. This amount is called the _Rate per cent per Annum_.

Thus, if we say that $200 is borrowed for three years at 4 per cent per annum, we mean that the borrower, at the end of each year, pays the lender $4 for each $100 borrowed--_i.e._, $8 interest for each year.

In the above example the interest is supposed to be paid to the lender at the end of each year. Interest thus reckoned is called _Simple Interest_.

The sum obtained by adding the interest for any given time to the principal is called the _Amount_ in that time.

COMMON INTEREST METHODS

If we were to find the interest on a sum of money for 3 years 4 months 5 days, we would find the interest for 1 year, then for 1 month (1/12 of a year), then for 1 day (1/360 of a year). Having the interest for 1 year 1 month 1 day, it is a simple matter of multiplication to get it for 3 years 4 months 5 days.

EXAMPLE:

What is the interest on $520 for 1 year 3 months at 6%?

WORK:

1 year 3 months = 1-1/4 year

$520 principal .06 -------- 4)$31.20 interest 1 year -------- $7.80 interest 1/4 year -------- $39.00 interest 1-1/4 year

THE 60-DAY INTEREST METHOD

In what is called the 60-Day Method, 360 days are considered one year, and 30 days one month. Upon this basis the interest for 60 days, or two months, at any rate, will be 1/6 of the interest for one year; and when the rate is 6% the interest for 60 days is one per cent or 1/100 of the principal. Thus, the interest of $247 for 60 days at 6% is $2.47.

EXAMPLE: Find the interest of $1728 for 80 days at 6%.

WORK:

$17¦28 = interest for 60 days. 5¦76 = interest for 20 days. ---+-- $23¦04 = interest for 80 days.

EXPLANATION:

The interest of $1728 for 60 days at 6% is 1% of $1728, or $17.28; and the interest for 20 days (1/3 of 60) is 1/3 of $17.28, or $5.76. Hence for 80 days it will be $17.28 plus $5.76, or $23.04.

METHODS OF RECKONING TIME

_The Common Method._--When the time is long, generally 30 days are considered a month.

_The Exact Method._--When the time is short, the exact number of days is generally counted but we sometimes find the exact number of days also when the time is long.

_The Bankers’ Method._--Bankers get the exact number of days between two dates, but each day is reckoned as 1/360 of a year.

PROBLEM, when the time is long.

Find the time between April 12, 1895, and September 22, 1899.

BEST METHOD

From April 12, 1895, to April 12, 1899, is 4 _years_.

From April 12, 1899, to Sept. 12, 1899, is 5 _months_.

From Sept. 12, 1899, to Sept. 22, 1899, is 10 _days_.

Time between dates = 4 years 5 months 10 days.

ANOTHER METHOD

1899 9 22 1895 4 12 ---------- 4 5 10

PROBLEM, when the time is short. Find the difference in time between April 12 and July 15, 1902.

WORK:

Number of days left in April = 18 in May = 31 in June = 30 in July = 15 -- Total number of days = 94

NOTE.--If the rate and principal are given, it is a simple matter to find the interest, now that we have the time.

Example of the use of Table: What is the time from February 10 to October 18, in the same year. February 10 is numbered 41, and October 18 is numbered 291; 291 - 41 = 250, _Ans._ This includes the last day, but not the first. If both days are taken, subtract 40 from 291 = 251, _Ans._ When February 29 occurs in a term, count an additional day. The day of the date of a note is not included in its term; thus, required the last day of grace of a note dated March 24, at 90 days. March 24 = 83; 83 + 93 = 176 = June 25, _Ans._

TABLE OF TIME, IN DAYS

The following table gives the exact time, in days, between two dates.

====+====+=====+=====+===+====+====+====+=====+====+====+==== Jan.|Feb.|March|April|May|June|July|Aug.|Sept.|Oct.|Nov.|Dec. ----+----+-----+-----+---+----+----+----+-----+----+----+---- 1| 32| 60| 91|121| 152| 182| 213| 244| 274| 305| 335 2| 33| 61| 92|122| 153| 183| 214| 245| 275| 306| 336 3| 34| 62| 93|123| 154| 184| 215| 246| 276| 307| 337 4| 35| 63| 94|124| 155| 185| 216| 247| 277| 308| 338 5| 36| 64| 95|125| 156| 186| 217| 248| 278| 309| 339 6| 37| 65| 96|126| 157| 187| 218| 249| 279| 310| 340 7| 38| 66| 97|127| 158| 188| 219| 250| 280| 311| 341 8| 39| 67| 98|128| 159| 189| 220| 251| 281| 312| 342 9| 40| 68| 99|129| 160| 190| 221| 252| 282| 313| 343 10| 41| 69| 100|130| 161| 191| 222| 253| 283| 314| 344 11| 42| 70| 101|131| 162| 192| 223| 254| 284| 315| 345 12| 43| 71| 102|132| 163| 193| 224| 255| 285| 316| 346 13| 44| 72| 103|133| 164| 194| 225| 256| 286| 317| 347 14| 45| 73| 104|134| 165| 195| 226| 257| 287| 318| 348 15| 46| 74| 105|135| 166| 196| 227| 258| 288| 319| 349 16| 47| 75| 106|136| 167| 197| 228| 259| 289| 320| 350 17| 48| 76| 107|137| 168| 198| 229| 260| 290| 321| 351 18| 49| 77| 108|138| 169| 199| 230| 261| 291| 322| 352 19| 50| 78| 109|139| 170| 200| 231| 262| 292| 323| 353 20| 51| 79| 110|140| 171| 201| 232| 263| 293| 324| 354 21| 52| 80| 111|141| 172| 202| 233| 264| 294| 325| 355 22| 53| 81| 112|142| 173| 203| 234| 265| 295| 326| 356 23| 54| 82| 113|143| 174| 204| 235| 266| 296| 327| 357 24| 55| 83| 114|144| 175| 205| 236| 267| 297| 328| 358 25| 56| 84| 115|145| 176| 206| 237| 268| 298| 329| 359 26| 57| 85| 116|146| 177| 207| 238| 269| 299| 330| 360 27| 58| 86| 117|147| 178| 208| 239| 270| 300| 331| 361 28| 59| 87| 118|148| 179| 209| 240| 271| 301| 332| 362 29| --| 88| 119|149| 180| 210| 241| 272| 302| 333| 363 30| --| 89| 120|150| 181| 211| 242| 273| 303| 334| 364 31| --| 90| --|151| --| 212| 243| --| 304| --| 365 ----+----+-----+-----+---+----+----+----+-----+----+----+----

COMPOUND INTEREST

Interest computed, at regular intervals, on the sum of the principal and any unpaid interest, is called _compound interest_. In other words, as soon as interest becomes due and is unpaid, it begins to draw interest at the same rate as the principal. Compound interest is generally paid on the deposits in savings banks and is used in calculating amortization and sinking funds.

Interest may be compounded quarterly, semi-annually, annually, or at the end of any other period agreed upon. In some States the collection of compound interest is not permitted.

EXAMPLE: Find the amount and the compound interest of $1200 at 6% for two years, interest compounded semi-annually.

SOLUTION:

$1200.00 First principal 36. Interest for 6 months -------- 1236. Principal at beginning of second 6 months 37.08 Interest for second 6 months -------- 1273.08 Principal at beginning of third period 38.19 Interest for third period -------- 1311.27 Principal at beginning of fourth period 39.34 Interest for fourth period -------- $1350.61 Amount at end of two years ======== $1350.61 Amount at end of two years 1200.00 Principal -------- 150.61 Compound interest.

EXCHANGE

in commerce is a method of making payments in distant places, without the actual transmission of money, but by a Bill of Exchange called _Draft_, which is a written request upon one person to pay a certain sum to another or to his order. The person who orders the money to be paid, is called the _Drawer_; the one who is directed to pay it, the _Drawee_, and the one to whom it is directed to be paid, the _Payee_.

_Domestic_ or _Inland Exchange_ is exchange between places in the same country: _Foreign Exchange_, between different countries.

If, for every little business transaction, money had to be sent from one business center to another, much needless inconvenience and expense would be incurred.

A man in Chicago owes a man in New York City a sum of money. He can send it to him in one of five ways:--

1. By Check.

2. By Post-office Order

3. By Express Order

4. By Bill of Exchange

5. By Telegraph

Suppose Mr. White of Chicago owes Mr. Brown of Boston $200 for groceries and Mr. Allen of Boston owes Mr. Warner of Chicago $200 for rent. Wouldn’t it save expense and trouble if Mr. White should go to Mr. Warner and Mr. Allen to Mr. Brown? Thereby two debts are cancelled by two city transactions and no money need be sent from one city to another.

This is all there is to Exchange, only in business life banks instead of individuals transact the business.

Only a small percentage of the money really passes from one city to another.

Exchange in the United States is carried on mostly by banks located in the large cities, which charge a small fee for transacting the business.

TABLE OF COMMERCIAL LAW IN THE STATES