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 most of its raw materials from a single supplier. This supplier sells to Free Spirit on terms of 4/15, net 60. The cost per period of the trade credit extended to Free Spirit, rounded to two decimal places, is Free Spirit's trade credit has a nominal annual cost of decimal places, and your final answer to two decimal places.) The effective annual rate (EAR) of the supplier's trade credit is assuming a 365-day year. (Note: Round all intermediate calculations to four If Free Spirit Industries Inc.'s supplier shortens its discount period to five days, this will the cost of the trade credit.

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 most of its raw materials from a single supplier. This supplier sells to Free Spirit on terms of 4/15, net 60. The cost per period of the trade credit extended to Free Spirit, rounded to two decimal places, is Free Spirit's trade credit has a nominal annual cost of decimal places, and your final answer to two decimal places.) The effective annual rate (EAR) of the supplier's trade credit is assuming a 365-day year. (Note: Round all intermediate calculations to four If Free Spirit Industries Inc.'s supplier shortens its discount period to five days, this will the cost of the trade credit.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 3C

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Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit. These terms will affect the cost of the asset for both the buyer and the seller. Consider the following case: Tasty Tuna Corporation buys on terms of 3/15, net 45 from its principal supplier. If Tasty Tuna receives an invoice for $856.75, then the true price of this invoice is . The supplier is willing to extend credit that exhibits a nominal annual cost of . Suppose Tasty Tuna doesn’t take the discount and instead chooses to pay its supplier five days' late—so that on average, Tasty Tuna will pay its supplier on the 50th day after the date of sale. As a result, Tasty Tuna can decrease its actual nominal cost of trade credit by by paying late.
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: Tasty Tuna Corporation buys on terms of 1/10, net 30 from its chief supplier. If Tasty Tuna receives an invoice for $1,545.78, 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.) $1,912.90 $1,377.29 $1,530.32 $1,071.22 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 Tasty Tuna does not take advantage of the discount and then chooses to pay its supplier late—so that on average, Tasty Tuna will pay its supplier on the 35th day after the sale. As a result,…
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: Tasty Tuna Corporation buys on terms of 1/20, net 60 from its chief supplier. If Tasty Tuna 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.) $1,553.04 $1,242.43 $1,056.07 O $931.82 The nominal annual cost of the trade credit extended by the supplier is calculations to four decimal places, and your final answer to two decimal places.) , assuming a 365-day year. (Note: Round all intermediate Suppose Tasty Tuna does not take advantage of the discount and then chooses to pay its supplier late-so that on average, Tasty Tuna will pay its supplier on the 65th day after the sale. As a result, Tasty Tuna can decrease its nominal cost of trade…
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: Tasty Tuna Corporation buys on terms of 4/10, net 45 from its chief supplier. A. If Tasty Tuna receives an invoice for $856.75, 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.) $822.48 $575.74 $699.11 $616.86 B. 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.) C. Suppose Tasty Tuna does not take advantage of the discount and then chooses to pay its supplier late—so that on average, Tasty Tuna will pay its supplier on the 50th day after the sale. As a result,…
8. Cost of trade credit 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: Green Moose Industries buys most of its raw materials from a single supplier. This supplier sells to Green Moose on terms of 4/15, net 30. The cost per period of the trade credit extended to Green Moose, rounded to two decimal places, is 4.17% Green Moose's trade credit has a nominal annual cost of decimal places, and your final answer to two decimal places.) The effective annual rate (EAR) of the supplier's trade credit is , assuming a 365-day year. (Note: Round all intermediate calculations to four If Green Moose Industries's supplier shortens its discount period to five days, this will increase the cost of the trade credit.
A large retailer obtains merchandise under the credit terms of 1/10, net 30, but routinely takes 60 dyas to pay its bills.(Because the retailer is an important customer, suppliers allow the firsm to stretch its credit terms.) What is the retailers effective cost of trade credit?
One Corporation has two potential suppliers. Both are supplying the items at similar list prices and trade,discounts. However, Supplier A.offered a credit term of 2/10, n/30 and the other offered a term of 3/10, n/40. Which of the following statements is true? a. Alpha should choose Supplier A and pay on the 10th day.b. Alpha should choose Supplier B and pay on the 10th day.c. Alpha can choose either supplier and always pay on the 10th day.d. If Alpha chose Supplier B, the former should pay on the 30th day so that it can maximize the trade discount
One Corporation has two potentialsuppliers. Both are supplying the items atsimilar list prices and trade,discounts.However, Supplier A.offered a credit term of2/10, n/30 and the.other offered a term of3/10, n/40. Which of the following statementsis true? a. Alpha should choose Supplier A and pay on the 10th day.b. Alpha should choose Supplier B and pay on the 10th day.c. Alpha can choose either supplier and always pay on the 10th day.d. If Alpha chose Supplier B, the former should pay on the 30th day so that it can maximize the trade discount
Assume the credit terms offered to your firm by your suppliers are 4/15, net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30
Shawnee Corp., a household appliances dealer, purchases its inventories from various suppliers. Shawnee has consistently stated its inventories at FIFO cost. Instructions Shawnee is considering alternate methods of accounting for the cash discounts it takes when paying its suppliers promptly. From a theoretical standpoint, discuss the acceptability of each of the following methods. a. Financial income when payments are made. b. Reduction of cost of goods sold for the period when payments are made. c. Direct reduction of purchase cost.