Assume the credit terms offered to your firm by your suppliers are 2.9/4, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30.
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- 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?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.1. How should the $25 Referral Credit be recorded in Runway’s incomestatement?2. When would Runway record the $25 Referral Credit? What are the journalentries Runway would record when the $25 Referral Credit is earned bythe Existing Customer? What are the journal entries Runway would recordwhen the $25 Referral Credit is redeemed against a $100 purchase madeby the Existing Customer?3. Runway is planning to adopt IFRSs in the near future. What is the relevantaccounting guidance it would follow under IFRSs?
- McEwan Industries sells on terms of 3/10, net 40. Total sales for the year are $1,912,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 66 days after their purchases. Assume 365 days in year for your calculations. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. a. What is the days sales outstanding? Round your answer to two decimal places. 43.6 $ b. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations. days 228,452 c. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places. 3.09 %Calculate the APR and rEAR of non-free trade credit associated with credit terms of 3/25, net 85, and 2.5/15, net 60, assuming that customers who do not take the discount a. pay on the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Credit terms of APR TEAR 3/25, net 85 APR TEAR b. delay payment until 15 days after the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. % % 3/25, net 85 2.5/15, net 60 Credit terms of % % % % 2.5/15, net 60 % %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…
- Calculate the APR and rEAR of non-free trade credit associated with credit terms of 3/20, net 65, and 2.5/15, net 75, assuming that customers who do not take the discount pay on the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Credit terms of 3/20, net 65 2.5/15, net 75 APR % % rEAR % % delay payment until 15 days after the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Credit terms of 3/20, net 65 2.5/15, net 75 APR % % rEAR % %You receive an invoice for $18,300 with terms of 5/15, n/60. If the supplier has a policy of allowing a cash discount for partial payments and you pay $11,500 within the discount period, calculate the amount of credit you will receive for this payment. a) $12,105.26 b) $12,105.0 c) $12.105It 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?
- 1.3 REQUIRED Use the information given below to determine the cost (as a percentage, expressed to two decimal places) to Ascot Traders of not accepting the discount. INFORMATION Max Wholesalers granted credit terms of 60 days to Ascot Traders but the wholesaler is prepared to allow a discount of 2.5% if the account is settled within 15 days.Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale for the buyer as well as the seller. Consider this case: Free Spirit Industries Inc. buys on terms of 1/20, net 45 from its chief supplier. If Free Spirit receives an invoice for $1,254.98, what would be the true price of this invoice? (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) O $1,304.55 $1,056.07 $1,242.43 O $1,118.19 The nominal annual cost of the trade credit extended by the supplier is , assuming a 365-day year. (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) Suppose Free Spirit does not take advantage of the discount and then chooses to pay its supplier late-so that on average, Free Spirit will pay its by paying late. (Note: supplier on the 50th day after the sale. As a result, Free Spirit can…According to ASC 606, how should a referral credit be recorded in your financial statement, as a reduction of revenue or as a marketing expense? Referral credit - Company ABC is giving their existing customers a $30 credit if they refer a New Customer (after this customer makes a purchase).
