Calla Lily Corp. purchases on terms of 2/8, net 45 days, does not accept discounts, and pays after 58 days. How much does the non-free trade credit cost in terms of effective annual percentage cost? (Incorporate a 365-day year)

Calla Lily Corp. purchases on terms of 2/8, net 45 days, does not accept discounts, and pays after 58 days. How much does the non-free trade credit cost in terms of effective annual percentage cost? (Incorporate a 365-day year)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Calla Lily Corp. purchases on terms of 2/8, net 45 days, does not accept discounts, and pays after 58 days.

How much does the non-free trade credit cost in terms of effective annual percentage cost? (Incorporate a 365-day year)

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4. Estrada V. Escritor sells on terms 3/10, net 30. Total sales for the year are P2,539,130. Forty percent of the customers pay on the tenth day and take discounts; the other 50% percent pay on 30th day average, and ten percent, on the average pay 40 days after their purchases. Assume a 365-day year, what is the average amount of receivables? (round to nearest peso amount).
Simmons Corporation can borrow from its bank at 21 percent to take a cash discount. The terms of the cash discount are 2.5/14, net 50. Compute the cost of not taking the cash discount. Note: Use a 360-day year. Do not round intermediate calculations. Input your final answer as a percent rounded to 2 decimal places.
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