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 30th 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: 6/10, n/30? 2. What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 5/10, n/30? 3. To motivate managers to take early-payment discounts, what is the appropriate accounting treatment for purchase discounts? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 6/10, n/30? (Do not round intermediate calculations. Enter your final answer as a percentage rounded to 2 decimal places (i.e., .1524 = 15.24%).) Opportunity cost %

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 30th 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: 6/10, n/30? 2. What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 5/10, n/30? 3. To motivate managers to take early-payment discounts, what is the appropriate accounting treatment for purchase discounts? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 6/10, n/30? (Do not round intermediate calculations. Enter your final answer as a percentage rounded to 2 decimal places (i.e., .1524 = 15.24%).) Opportunity cost %

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter5: Corporate Ethical Governance & Accountabililty

Section: Chapter Questions

Problem 19.1EC

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Similar questions

Which of the following is indicative of discounts received from a supplier on account of early settlement of an amount owed as a result of a credit purchase? a) Quantity discount b) Value discount c) Early settlement discount
2.-When deciding to accept a cash discount from a supplier, on what day is it advisable to take the financing? A) On the last day of the discount period, to see if they are able to meet the discount. B) On the first day of the discount period, so why wait? C) On any day of the discount period D) In the middle of the discount period, so there is no risk.
Which of the following refers to the ability of a firm to buy repeatedly from a supplier on trade credit without re-applying for credit? Select one: a. Net terms b. Cash discount c. Open account d. Present value of delayed payment
Is it true that, when one firm sells to another on credit, the seller records the transaction as an account receivable while the buyer records it as an account payable and that, disregarding discounts, the receivable typically exceeds the payable by the amount of profit on the sale?
Kate Trading made an early payment to its suppliers to take advantage of the discount offered by the supplier. What account is most likely used for the discount that is being acquired by Kate Trading? cash discount trade discount sales discount purchase discount
This module discusses discounts given out to customers based on payment terms, such as 2/10, n/30. : What would the credit terms 3/15, n/45 stand for? Explain why it is important for a company to keep track of how much money in discounts is given out? What account is used to track discounts? From a business owner's point of view, what are the advantages of allowing discounts? From a business owner's point of view, what are the disadvantages of allowing discounts?
Which of the following statements are true regarding sales discounts (i.e., discounts customers receive for paying quickly)? I. Net Income differs between the net and gross methods when customers do not pay within the discount period. II. The net and gross methods do not affect the amount or timing of cash collected. III. Customers have to elect in advance whether they will pay in time to take the discount. Group of answer choices: I only II only III only I and II only II and III only
Why is it important to understand shipping terms such as FOB destination or FOB shipping point? Why is it important to understand shipping terms such as FOB destination or FOB shipping point? Shipping terms determine when the customer must pay cash to the seller Shipping terms determine whether any part of the sale is refundable to the customer Shipping terms determine the amount that the seller must add to the bad debt allowance account Shipping terms determine who owns the inventory at a given moment
Which of the following accounts is not a contra-revenue? Group of answer choices A)Sales discounts B)Credit card discounts C)Sales returns and allowances D)Allowance for doubtful accounts E)All the above are contra-revenues
Amounts due from customers that are expected to be collected in the current operating cycle and do not charge interest are known as: Group of answer choices sales returns & allowances cost of goods sold accounts receivable notes receivable The allowance method of estimating uncollectible accounts is widely-used because it follows this principle: Group of answer choices Matching Going-concern Revenue Recognition Cost
1. From pages 5-1 and 5-2 of the VLN, which statement is FALSE as it relates to a trade discount? Group of answer choices A. It is a concept. B. The company provides a good or service at a reduced price. C. A contra revenue is recognized at the time of sale. D. It causes the sale to be recognized at the reduced, agreed upon price.
The following relate to trade discounts: 1. Trade discounts are given to customers to induce them to pay promptly. II. Trade discounts are not taken up in the books because they are merely adjustments to establish the final selling price A. false, true B. true, true C. true, false D. false, false