Retailers that accept credit cards pay a “swipe fee” to credit-card issuers such as Visa and Mastercard ranging from 1 to 3 percent of the purchase. The credit-card companies prohibited retailers from passing that fee on to consumers, but a recent lawsuit settlement proposal lifted that restriction. Under the settlement, retailers can charge 2.5 to 3 percent on each transaction. Discuss this issue and develop a report on the pros and cons of retailers adding a surcharge to credit purchases. (AACSB: Written and Oral Communication; Reflective Thinking)

Retailers that accept credit cards pay a “swipe fee” to credit-card issuers such as Visa and Mastercard ranging from 1 to 3 percent of the purchase. The credit-card companies prohibited retailers from passing that fee on to consumers, but a recent lawsuit settlement proposal lifted that restriction. Under the settlement, retailers can charge 2.5 to 3 percent on each transaction. Discuss this issue and develop a report on the pros and cons of retailers adding a surcharge to credit purchases. (AACSB: Written and Oral Communication; Reflective Thinking)

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 26Q: A customer was unable to pay the accounts receivable on time in the amount of $34,000. The customer...

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Retailers that accept credit cards pay a “swipe fee” to credit-card issuers such as Visa and Mastercard ranging from 1 to 3 percent of the purchase. The credit-card companies prohibited retailers from passing that fee on to consumers, but a recent lawsuit settlement proposal lifted that restriction. Under the settlement, retailerscan charge 2.5 to 3 percent on each transaction. Discuss this issue and develop a report on the pros and cons of retailers adding a surcharge to credit purchases.
Which of the following practices by a credit card company results in lower interest charges to the cardholder? The card company states interest as a monthly percentage rather than an annual percentage. The card company allows a grace period before interest is accrued. The card company allows cardholders to skip payments on their cards. The card company calculates finance charges from the date of purchase to the date the amount is paid.
Layaway plans allow you, for a fee, to pay for an item over a period of time and then receive the item when you finish paying for it. In November 2011, Senator Charles E. Schumer of New York warned that the holiday layaway programs recently reinstated by several popular retailers were, when you took the fees into account, charging interest at a rate significantly higher than the highest credit card rates.† Suppose that you bought a $66 item on November 15 on layaway, with the final payment due December 15, and that the retailer charged you a $5 service fee
Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require the customer to pay the entire note in a single payment 6 months after issuance. Consider the following transactions, which describe Marydale’s experience with two such notes: a. On October 31, 2019, Marydale accepts a 6-month, 12% note from Customer A in lieu of a $4,800 cash payment for services provided that day. b. On February 28, 2020, Marydale accepts a 6-month, $3,000, 5% note from Customer B in lieu of a $3,000 cash payment for services provided on that day. c. On April 30, 2020, Customer A pays the entire note plus interest in cash. d. On August 31, 2020, Customer B pays the entire note plus interest in cash. Required: Prepare the necessary journal and adjusting entries required to record Transactions a through d in Marydale’s records.
BayFish Company currently uses maximum trade credit by not taking discounts on its purchases. Company is planning to borrow from its bank, using notes payable, in order to take trade discounts. The firm wants to determine the effect of this policy change on its net income. The standard industry credit terms offered by all its suppliers are 2/15, net 40 days, and BayFish pays in 40 days. Its net purchases are $10,000 per day, using a 365-day year. The interest rate on the notes payable is 8% percent and the firm’s tax rate is 40 percent. If the firm implements the plan, what is the expected change in BayFish’s net income? (Hint: Use Incremental approach table)
Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table: Customer Accounts Receivable Average age of account Average payment period of customer A $11,000 42 days 50 days B $25,000 70 days 65 days C $10,000 48 days 45 days D $28,000 55 days 50 days E $14,000 50 days 60 days F $19,000 21 days 35 days G $30,000 10 days 30 days H $16,000 25 days 40 days…
Easter Supply sells a variety of merchandise to retail stores on account, but it insists that any customer who fails to pay an invoice when due must replace their accont receivable with an interest bearing nte. The company adjusts and closes its accounts at december 31. Among the transactions relating to notes receivables were the following. sept. 1 Receivable from a customer (Party Plus) a 9 month, 10 percent note for $75,000 in settlement of account receivable due today. june 1 Collected in full the 9 month, 10 percent note receivable from Party Plus, including interest. I need a. prepaqre a journal entries ( in general journal form) to record: (1) the receipt note on September1; (2) the adjustment for interest on December 31; and (3) collection of principla and interest on June 1. (To better illustrate the allocation of interest revenue between accounting periods, W will assume Easter Supply make ajusting entries only at year end.) b. Assume that instead of paying the same the…
A customer was unable to pay the accounts receivable on time in the amount of $34,000. The customer was able to negotiate with the company and transferred the accounts receivable into a note that includes interest, along with an up-front cash payment of $6,000. The note maturity date is 24 months with a 15% annual interest rate. What is the entry to recognize this transfer?
When a customer is delinquent on paying a notes receivable, your company has the option to continue to attempt collection or sell the debt to a collection agency. Research the benefits and challenges with each of these options and in a short essay, answer the following questions. A. What are the benefits and challenges of continuing to attempt collection yourself? B. What are the benefits and challenges of selling debt to a collection agency? C. If you had a dishonored notes receivable, which option would you select and why? D. Would you weight certain benefits or challenges differently when making your selection? How?
Ramona's clothing has a retail store specializing in women's clothing. the store has established a liberal return policy for the holiday season in order to encourage gift purchases.any item purchased or November and December may be returned through January 31st, with a receipt, for cash or exchange. if the customer does not have a receipt cash will still be refunded for any item under $75. If the item is more than $75, a check is mailed to the customer. whenever an item is returned, a store clerk completes a return slip, which the customer signs. the return slip is placed in special box. The store manager visits the return counter approximately once every 2 hours to authorize the return slips clerks are instructed to place the returned merchandise on the proper rack on the cell and floor as soon as possible. This year, returns at Ramona's clothing have reached an all-time high. There are large number of returns under $75 with receipts. A. How can sales clerks employed at Ramona's…
Lonely Company accepted a P 200,000, 90-day, 12% interest bearing note dated November 15, 2021 from a customer. On December 15, 2021, Lonely discounted the note at Finance Company at 15% discount rate. Lonely informed the maker of the note regarding the discounting arrangement. On maturity date, the maker of the note did not pay the note, and as a result Finance Company charged Lonely Company for the total amount plus P 2,000 protest fee. QUESTION: How much should Lonely Company pay to Finance Company when the maker fails to pay the note upon its maturity? Group of answer choices P 206,000 P 208,000 NONE P 202,000
It is typically beneficial for companies to take advantage of early-payment discounts allowed on purchases made on credit. To see why this is the case, determine the effective rate of interest associated with not taking advantage of the early-payment discount for each of the following situations. Assume in each case that payment is made on the 45th day of the billing cycle. Required: 1. What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 2/25, n/45? 2. What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 1/25, n/45? 3. To motivate managers to take early-payment discounts, what is the appropriate accounting treatment for purchase discounts?