None Fairview Clinic buys $600,000 in medical supplies each year(at gross prices) from its major supplier, ConsolidatedSupplies, which offers the clinic terms of 4/10, net 30. Whatis Fairview Clinics's costly trade credit?A. $32,000B. $48,000C. $40,000D. $25,000E. $27,000

Step 1: Introduction to the Trade CreditTrade credit is a facility provided by one trader to another…

Answered: Fairview Clinic buys $600,000 in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

What is Fairview clinic's costly trade credit?
H4. Resolute Health buys $600,000 of a particular item (at gross prices) from its major supplier, Cardinal Health, which offers Resolute terms of 2/10, net 30. Currently, the hospital is paying the supplier the full amount due on Day 30, but it is considering taking the discount, paying on Day 10 and replacing the trade credit with a bank loan that has a 12 percent rate. Assume 360 days per year. What is the amount of free trade credit that the organization obtains from Cardinal Health? Format is $xx,xxx.xx What is the total amount of trade credit offered by Cardinal? Format is $xx,xxx.xx What is the approximate annual cost of the costly trade credit? Format is xx.xx% Should the organization replace a portion of the trade credit with the bank loan? Format is Yes or No If the bank loan is used, how much of the trade credit should be replaced? Format is $xx,xxx.xx
Give me answer this general accounting question
Provide correct answer
Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 5/10, net 105. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.) a. 21.35% b. 21.78% c. 17.68% d. 20.22% e. 19.57%
Glam company offers customers a pottery cereal bowl if they send in three boxtops from its products and P10. The entity estimated that 60% of the boxtops will be redeemed. During the current year, the entity sold 675,000 boxes and customers redeemed 330,000 boxtops receiving 110,000 bowls. The cost of each bowl is P25. 1a. What is the premium expense for the current year? a. 1,650,000 b. 2,025,000 c. 4,550,000 d. 6,075,000 1b. What is the liability for outstanding premiums at year-end? a. 250,000 b. 375,000 c. 625,000 d. 875,000
Crazy Cliff’s Computers (CCC) purchases computer parts from its suppliers 2/5, net 30. What is the effective annual cost of not taking the trade discount? Select one: a. 2.00% b. 2.04% c. 27.43% d. 34.31% e. None of the above.
YVONE Trading requests credit terms from its trade supplier, Mestle Corporation. YVONE operates 360 days a year. The trade supplier offers two credit terms to YVONE as follows: Credit term number 1: 2/15, net 30 Credit term number 2: 1/10, net 90 Required: 1. Compute the nominal cost of forgoing the cash discount of the two credit terms. 2. Compute the effective cost of credit of the two terms. 3. If the prevailing bank interest rate is 15% of the nominal rate, which credit term should be bypassed to use the money as the source of financing? Discuss your answer briefly. (with solution)
Problem 2: JIN Corporation started a promotional program. A towel is offered as a premium to customers who send in 10 box tops of facial soap returned and a remittance of P25. Distribution cost is P10 per towel. The entity estimated that only 60% of the box tops reaching the market will be redeemed. The entity provided the following information: 2020 2021 Facial soap sales, P50 per unit 2,875,000 360,000 2,500,000 Towel purchases, P90 per unit Number of box tops returned 337,500 22,500 38,550 Requirements: 4. Compute for the premiums (as an asset) amount for the year ended: A. December 31, 2020 B. December 31, 2021
10. SM Supermarket purchases P4,562,500 in goods over a 1-year period from its sole supplier. The supplier offers trade credit under the following terms: 2/15, net 50 days. If Hayes chooses to pay on time but not to take the discount, what is the average level of the firm's accounts payable, and what is the effective annual cost of its trade credit? (Assume a 365-day year.) A. P208,333; 17.81% D. P416,667; 27.43% B. P416,667; 17.54% E. P625,000; 23.45% C. P625,000; 17.54% 11. Mr. Jones borrows P2,000 for 90 days and pays P35 interest. What is his effective rate of interest? A. 7.0% C. 11.7% D. none of these B. 9.3% 12. Ms. Smith borrowed P125,000 at 11% stated rate of interest and was to pay back the loan in 24 monthly payments. What is her effective rate of interest? A. 10.56% C. 21.12% В. 18.96% D. 22.00%
AL Enterprises purchases P4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its nonfree trade credit? (Assume a 365-day year.)20.11%23.45%22.28%21.17%24.63%
Excellent Company manufactures a product that is packaged and sold. A plate is offered to customers sending in three wrappers accompanied by a remittance of P20. Data with respect to the premium offer are summarized below: Sales Purchase of premium, P50 per plate Number of plates distributed as 3,800,000 4,000,000 380,000 560,000 premium 4,500 8,000 Estimated number of plates to be distributed in subsequent period 2,500 3,500 Distribution cost P10 per plate Required: Prepare journal entries that would be made in 2020 and 2021 to record sales, premium purchases and redemptions, and year-end adjustments.

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS

Fairview Clinic buys $600,000 in medical supplies each year (at gross prices) from its major supplier, Consolidated Supplies, which offers the clinic terms of 4/10, net 30. What is Fairview Clinics's costly trade credit? A. $32,000 B. $48,000 C. $40,000 D. $25,000 E. $27,000