Answered: The cost of not taking the discount…

Business

Finance

The cost of not taking the discount trade credit of 3/20, net 90 is approximately?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 3P: What are the nominal and effective costs of trade credit under the credit terms of 3/15, net 30?

See similar textbooks

Related questions

Q: . A buyer does not take advantage of a supplier's credit terms of 2/10, n/30 but pays in full at the…

A: Companies often encourage their customers to pay early of their dues by introducing trade discounts.…

Q: Sales ( Credit) = 850,000 Sales Return and allowance ( Debt) = 28000 A/R ( Debt)= 86000…

A: SOLUTION- NET SALES = (SALES - SALES RETURN)

Q: Calculate the APR and rEAR of non-free credit asscoiated with credit terms of 3/10 net 50, and…

A: Given: Given:

Q: Assume Simple Co. had credit sales of $250,000 and cost of goods sold of $150,000 for the period.…

A: Account receivable means the amount due from customer whom we sold the goods on credit. Allowance…

Q: When a decision is made to reject the discount and pay on the last day of the loan term, there is a…

A: A loan discount involves lower interest charges and other costs. At times the entire discount amount…

Q: Cost of Trade Credit Calculate the nominal annual cost of trade credit under each of the following…

A: The nominal rate of credit = Discount rate1-discount rate×365credit period-discount perioid 1. The…

Q: List Price Trade Discount Rate Trade Discount $282.00 25% Net Price

A: Trade discount - It is the discount on list price given by seller to purchaser on the bulk purchase…

Q: Cost of Trade Credit What are the nominal and effective costs of trade credit under the credit…

A: The formula used is shown: DP= Discount Percentage P= Discount Period DCO= Days credit Outstanding

Q: Which of the following changes in credit standards and terms would cause a decrease in profit? A)…

A: Changes in credit standards and credit terms have a meaningful impact on the profitability of the…

Q: Calculate the nominal annual cost of trade credit under each of the following terms. Assume a…

A: Annual nominal cost of trade credit = Discount %/(100-Discount %) x (360/Allowed payment days –…

Q: Nominal cost of trade credit: % Effective cost of trade credit

A: Nominal cost of trade credit is given by the following formula : = [(Discount % / 100 - Discount…

Q: What are the nominal and effective costs of trade credit under the credit terms of 1/15, net 35?…

A: Discount Rate = 1%Discount Days = 35-15Discount Days = 20

Q: c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use…

A: Given, Invoice amount=$ 1,500 1/15, net 60, basis which means if company y pays within 15 days then…

Q: What are the nominal and effective costs of trade credit under the credit terms of 4/10, net 40?…

A: Given: 4/10, net 40. Number of days in a year = 365 ------------------------- 4/10, net 40 refers to…

Q: Compute the annual approximate interest rate of not taking a discount using the following scenarios.…

A: Cash Discount is the discount provided by the sellers to encourage buyers to make payment of their…

Q: what is the percentage cost of trade credit to customers who do not take the discount and pay in 40…

A: 1) Therefore, the percentage of cost of trade credit to customers are 37.62%

Q: Why is some trade credit called free while other credit is called costly? If a firm buys on terms…

A: Trade Credit: The trade credit denotes to the credit sale. This credit be indebted money for the…

Q: Assume Simple Co. had credit sales of $254,000 and cost of goods sold of $154,000 for the period.…

A: Required journal entry as on end-of-period adjustment is as follows:

Q: Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays…

A: Nominal annual percentage cost=[Discount rate / (100-Discounting rate ) * [365 /(Total days to pay -…

Q: The cost of not taking the discount on trade credit of 2/10, net 30 is approximately. (Use 360 days…

A: Trade credit is an agreement of commercial financing according to which a customer can buy goods or…

Q: d. What is the percentage cost of trade credit to customers who do not take the discount and pay in…

A: Accounts receivables are the current assets which allows the customers of an entity to take some…

Q: Question 17 Consider the following Supplier's credit terms: 2/10. n/45 3/10, n/60 1/15, n/30 Which…

A: Cash discount: Cash discount is an advantage provided to the purchaser to reimburse the amount less…

Q: Newsome Inc. buys on terms of 4/10, net 45. It does not take the discount, and it generally pays…

A: Effective annual percentage = (1+[Discount rate/(1–Discount Rate)])^n– 1 Where n= No. of days in a…

Q: firm is offered trade credit terms of 3/15, net 45 days. The firm does not take the discount, and it…

A: Cost of not taking Trade Discount = Discount % / (100 - Discount%) × 365/(Total Pay period -…

Q: A company is offred trade credit terms of 3/15, net 30 days. If the firm does not take the discount,…

A: The term 2/15, net 30 days means customer will get 3% discount if he pay within 15 days but here…

Q: What are the nominal and effective costs of trade credit under the credit terms of 3/20, net 35?…

A: Formula: Nominal cost of trade credit = [ Discount rate / ( 100 - Discount rate ) ] x[ ( 365 /…

Q: credit terms :5, 1/15, n/45. what is the sh discount?

A: When we purchase goods , the buyer may offer discount on the goods sold . Discount are of two…

Q: b,c &d. What is project NPV if the discount rates are 4%, 18%, 35%? (Negative amount should be…

A: NPV means PV of net benefits arises in future from the project. It can be simply computed by taking…

Q: Net credit sales $831, 400 Account Receivable 222,850 Allowance for Doubtful Account 0. Do the…

A: Allowance for doubtful accounts - Allowance for doubtful accounts is the provision made by the…

Q: Newsome inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: How to determine if giving up discount on 3/10 net 45 credit is less costly than a 14% short term…

A: Discount on 3/10 net 45, indicates that the firm would get a discount i.e. 3% if the supplier pays…

Q: 7.- What are the likely effects on sales of the following change in credit policy: A) Lower the…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: What are the nominal and effective costs of trade credit under the credit terms of 4/15, net 40?…

A: Given Information: Credit term is 4/15, net 40 Assume 365 days

Q: The cost of discounts on credit terms of 3/10, n/45 is a. 31.78% b. 31.48% c. 20.99% d. 30%

A: Cost of discount credit terms means what cost an entity will have to bear if it is unable to pay…

Q: Compute the annual approximate interest rate of not taking a discount of 2/10 net 60.

A: The company which sells goods on sales will offer discounts to its accounts receivables if it pays…

Q: ILTIS UI 1730, net 70, and decides to forgo the trade credit discount and pay on the net day, what…

A: The question is based on the concept of business accounting.

Q: Current credit policy proposed credit policy Cash price $48.00 $48.00 Credit price n/a $50.00…

A: In the given situation, there is a proposed credit policy at an increased price but lower…

Q: Cost of Trade Credit Calculate the nominal annual cost of trade credit under each of the following…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: On a 365-day basis, what is the rate per period of using trade credit if terms are 2/10, net 30, and…

A: Here, Credit Terms is 2/10 net 30 Payment is made on the 20th day Days in an year is 365

Q: On a 365-day basis, what is the effective annual rate of using trade credit if terms are 2/10, net…

A: Effective Cost of Trade Credit = [1 + (Disc.%/100 - Disc.%)]^[365 / (Days Credit Outstanding –…

Q: It is typically beneficial for companies to take advantage of early-payment discounts allowed on…

A: Opportunity for not taking the discount = Discount %/ (1 - Discount %) x (360/(Normal credit…

Q: If the terms of credit are 1/15, net 30, what is the opportunity cost of not taking the discount? A.…

A: Opportunity cost refers to the cost of losing other alternatives due to lack of resources as one…

Q: Why is some trade credit called free while other credit is called costly? If a firm buys on terms of…

A: Trade credit is a form of debt which is arise from selling goods on credit. It is reflected in…

Question

The cost of not taking the discount trade credit of 3/20, net 90 is approximately?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Captain Whitman Ship Supplies offers terms of 3/15, net 45. If a purchaser takes the discount and pays on the 10th day, what is the nominal cost of trade credit? Now suppose a purchaser actually pays on the 20th day but still takes the discount. What is the actual nominal cost of the trade credit?
Which of the following numbers represents the discount percentage applied if a customer pays within a discount window and credit terms are 3/15, n/60? A. 3 B. 15 C. 60 D. 3 and 15
Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date. a. 1/15, net 20 b. 2/10, net 60 c. 3/10, net 45 d. 2/10, net 45 e. 2/15, net 40
Calculate the nominal annual cost of no free trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date. a. 1/15, net 20 b. 2/10, net 60 c. 3/10, net 45 d. 2/10, net 45 e. 2/15, net 40
d. What is the percentage cost of trade credit to customers who do not take the discountand pay in 70 days?e. What would happen to McEwan’s accounts receivable if it toughened up on its collectionpolicy with the result that all nondiscount customers paid on the 30th day?
Credit terms with a new supplier are 2/10, net 30 If unable to pay within the discount period and pay the cash price, what is the Effective Cost of Trade Credit (EFF%) if paid in 20 days? Group of answer choices 87.2449% 74.4898% 105.4367% 109.0491% 76.6667%
Calculate the APR and rEAR of non-free credit asscoiated with credit terms of 3/10 net 50, and 2.5/15 net 45 assuming that customers who do not take the discount (a) pay on the last due date and (b) delay payment until 10 day after the due date. I submitted this question and was asked to resubmit as it seemed to be missing information. This is the only information given in the problem.
You buy goods at a list price of $1,100. If you receive a trade discount of 30% and terms are “2/15, n/45,” what amount must you pay if you pay within the discount period?
The net price of an item after trade discounts of 34.00%, 13.00%, and 3.50% is $3,520.00. a. Calculate the regular selling price of the goods. $0.00 Round to the nearest cent b. Calculate the equivalent discount rate of the series of discount rates. 0.00 % Round to two decimal places
Assume the credit terms offered to your firm by your suppliers are 4/15, net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30
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?
If the annualized cost of the trade credit discount is 7.37%, what is the net trade credit period? Assume a discount percentage of 1% for payments received on or before 20 days. Select one: a. 20 days b. 30 days c. 50 days d. 70 days