Loose-leaf for Fundamentals of Financial Accounting
5th Edition
ISBN: 9781259115400
Author: Fred Phillips Associate Professor, Robert Libby, Patricia Libby
Publisher: McGraw-Hill Education
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Question
Chapter 6, Problem 7MC
To determine
The meaning of sales discounts with terms 2/10, n/30.
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Sales discounts with terms 2/10, n/30 meana. 10 percent discount for payment received within30 days of the date of sale.b. 2 percent discount for payment received within 10 daysor the full amount (less returns) is due within 30 days.c. Two-tenths of a percent discount for payment receivedwithin 30 days.d. None of the above
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
What does "2/10" mean, with respect to "credit terms of 2/10, n/30"?
A.
A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.
B.
Interest of 2 percent will be charged if the invoice is paid after 10 days from the date on the invoice.
C.
A discount of 10 percent will be allowed if the invoice is paid within two days of the invoice date.
D.
Interest of 10 percent will be charged if invoice is paid after two days.
Chapter 6 Solutions
Loose-leaf for Fundamentals of Financial Accounting
Ch. 6 - Prob. 1QCh. 6 - If a Chicago-based company ships goods on...Ch. 6 - Define goods available for sale. How does it...Ch. 6 - Define beginning inventory and ending inventory.Ch. 6 - Describe how transportation costs to obtain...Ch. 6 - What is the main distinction between perpetual and...Ch. 6 - Why is a physical count of inventory necessary in...Ch. 6 - What is the difference between FOB shipping point...Ch. 6 - Describe in words the journal entries that are...Ch. 6 - What is the distinction between Sales Returns and...
Ch. 6 - Prob. 11QCh. 6 - In response to the weak economy, your companys...Ch. 6 - Prob. 13QCh. 6 - Why are contra-revenue accounts used rather than...Ch. 6 - What is gross profit? How is the gross profit...Ch. 6 - Prob. 1MCCh. 6 - Prob. 2MCCh. 6 - Prob. 3MCCh. 6 - Prob. 4MCCh. 6 - Prob. 5MCCh. 6 - Prob. 6MCCh. 6 - Prob. 7MCCh. 6 - Prob. 8MCCh. 6 - Prob. 9MCCh. 6 - Prob. 10MCCh. 6 - Distinguishing among Operating Cycles Identify the...Ch. 6 - Calculating Shrinkage in a Perpetual Inventory...Ch. 6 - Prob. 6.3MECh. 6 - Inferring Purchases Using the Cost of Goods Sold...Ch. 6 - Evaluating Inventory Cost Components Assume...Ch. 6 - Prob. 6.6MECh. 6 - Recording Journal Entries for Purchases and Safes...Ch. 6 - Prob. 6.8MECh. 6 - Recording Journal Entries for Sales and Sales...Ch. 6 - Prob. 6.10MECh. 6 - Prob. 6.11MECh. 6 - Calculating Shrinkage and Gross Profit in a...Ch. 6 - Preparing a Multistep Income Statement Sellall...Ch. 6 - Prob. 6.14MECh. 6 - Computing and Interpreting the Gross Profit...Ch. 6 - Interpreting Changes in Gross Profit Percentage...Ch. 6 - Prob. 6.17MECh. 6 - Understanding Relationships among Gross Profit and...Ch. 6 - Relating Financial Statement Reporting to Type of...Ch. 6 - Prob. 6.2ECh. 6 - Identifying Shrinkage and Other Missing inventory...Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.5ECh. 6 - Inferring Missing Amounts Based on Income...Ch. 6 - Prob. 6.7ECh. 6 - Prob. 6.8ECh. 6 - Reporting Purchases, Purchase Discounts, and...Ch. 6 - Prob. 6.10ECh. 6 - Items Included in Inventory PC Mall, Inc., is a...Ch. 6 - Prob. 6.12ECh. 6 - Prob. 6.13ECh. 6 - Reporting Net Sales with Credit Sales and Sales...Ch. 6 - Prob. 6.15ECh. 6 - Prob. 6.16ECh. 6 - Prob. 6.17ECh. 6 - Determining the Effects of Credit Sales, Sales...Ch. 6 - Prob. 6.19ECh. 6 - Inferring Missing Amounts Based on Income...Ch. 6 - Prob. 6.21ECh. 6 - Prob. 6.22ECh. 6 - (Supplement 6A) Recording Purchases and Sales...Ch. 6 - Prob. 6.1CPCh. 6 - Prob. 6.2CPCh. 6 - Prob. 6.3CPCh. 6 - Prob. 6.4CPCh. 6 - (Supplement A) Recording Inventory Transactions...Ch. 6 - Prob. 6.1PACh. 6 - Reporting Purchase Transactions between Wholesale...Ch. 6 - Recording Sales with Discounts and Returns and...Ch. 6 - Prob. 6.4PACh. 6 - (Supplement A) Recording Inventory Transactions...Ch. 6 - Prob. 6.1PBCh. 6 - Reporting Purchase Transactions between Wholesale...Ch. 6 - Prob. 6.3PBCh. 6 - Prob. 6.4PBCh. 6 - (Supplement A) Recording Inventory Transactions...Ch. 6 - Accounting for Inventory Orders, Purchases, Sales,...Ch. 6 - Prob. 6.1SDCCh. 6 - Prob. 6.2SDCCh. 6 - Internet-Based Team Research: Examining an Annual...Ch. 6 - Evaluating the Results of Merchandising Operations...Ch. 6 - Prob. 6.6SDCCh. 6 - Prob. 6.1CC
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Similar questions
- 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 40arrow_forwardCaptain 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?arrow_forwardIf the cash discount terms for a $500 purchase are 4/10 net 30, the number 10 refers to Multiple Choice the percentage increase in price if the bill is not paid within 10 days. the number of days for which the discount is valid. the penalty in dollars if the bill is not paid within 10 days. the percentage discounted if the bill is paid within 30 days. the discount in dollars per unit if the order is paid on time within 30 days.arrow_forward
- Required: a. A firm currently offers terms of sale of 3/25, net 50. Calculate the effective annual rate. a-1. Calculate the effective annual rate if the terms are changed to 4/25, net 50. a-2. What effect does an increase in the discount rate have on the implicit interest rate charged to customers that pass up the discount? b-1. Calculate the effective annual rate if the terms are changed to 3/35, net 50. b-2. What effect does a decrease in the extra days of credit have on the implicit interest rate charged to customers that pass up the discount? c-1. Calculate the effective annual rate if the terms are changed to 3/25, net 40. c-2. Is there any difference between the implicit interest rate for terms of 3/35, net 50 and 3/25, net 40?arrow_forwardA supplier grants credit terms of 1/5, net 30. What is the effective annual rate of the discount on a purchase of $5,000?arrow_forwardWhich of the following terms of trade credit is the more expensive? a. A 3 percent cash discount if paid on the 15th day with bill due on the 45th day (3/15, net 45) b. A 2 percent cash discount if paid on the 10th day with the bill due on the 30th day (2/10, net 30)arrow_forward
- Use the following information from an account analysis statement to answer the following questions: • Collected balance = $500,000 • Service charges = $5,000 • Reserve requirement ratio of 10 percent • Days in month = 30 days • Earnings credit rate = 0.60 percent a. Calculate the monthly earnings credit allowance and the net service charges. b. Solve for the collected balances required and interpret the value. c. Suppose that the earnings credit rate is re-negotiated upward to 0.75 percent. Recalculate the earnings credit allowance, net service charge, and collected balance required. * With complete calculationarrow_forwardPercent of Sales Method At the end of the current year, Accounts Receivable has a balance of $800,000; Allowance for Doubtful Accounts has a credit balance of $7,000; and sales for the year total $3,600,000. Bad debt expense is estimated at 1.25% of sales. a. Determine the amount of the adjusting entry for uncollectible accounts.$ b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.Adjusted BalanceDebit (Credit)Accounts Receivable $Allowance for Doubtful Accounts $Bad Debt Expense $ c. Determine the net realizable value of accounts receivable.$arrow_forwardWhat is the approximate annual cost of foregoing the cash discount if the credit term is 2/15, net 40 and the company pays end of 50 days? Use 360 days a year. Group of answer choices 28.80 percent 29.39 percent 20.57 percent 20.99 percentarrow_forward
- Percent of Sales Method At the end of the current year, Accounts Receivable has a balance of $560,000; Allowance for Doubtful Accounts has a credit balance of $5,000; and sales for the year total $2,520,000. Bad debt expense is estimated at 1.25% of sales. a. Determine the amount of the adjusting entry for uncollectible accounts.$ b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Adjusted BalanceDebit (Credit) Accounts Receivable $ Allowance for Doubtful Accounts $ Bad Debt Expense $ c. Determine the net realizable value of accounts receivable.arrow_forwardThe approximate effective cost (EC) of financing the discount price of trade credit under terms 2/10, net/30 using a 360 day year is?arrow_forwardPlease Solve This Question International Industries sells on terms of 3/10, net 50. Gross sales last year were 5,662,500 and accounts receivable averaged 547,500. Half of International’s customers paid on the 15th day and took discounts. What are the nominal and effective costs of trade credit to International’s non-discount customers? (Hint: Calculate sales/day based on a 360-day year, then calculate average receivables of discount customers and then find the DSO for the non-discount customers.arrow_forward
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