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 2.5/20, net 45 from its chief supplier. If Tasty Tuna receives an invoice for $1,889.99, what would be the true price of this invoice? $1,934.88 $1,842.74 $2,579.84 $2,303.43 The nominal annual cost of the trade credit extended by the supplier is 37.38% (Note: Assume there are 365 days in a year.) The effective annual rate of interest on trade credit is 44.64% 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, Tasty Tuna can decrease its nominal cost of trade credit by 6.23 % 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 2.5/20, net 45 from its chief supplier. If Tasty Tuna receives an invoice for $1,889.99, what would be the true price of this invoice? $1,934.88 $1,842.74 $2,579.84 $2,303.43 The nominal annual cost of the trade credit extended by the supplier is 37.38% (Note: Assume there are 365 days in a year.) The effective annual rate of interest on trade credit is 44.64% 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, Tasty Tuna can decrease its nominal cost of trade credit by 6.23 % by paying late.

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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Backyard World buys plastic pools from a supplier with an invoice amount of $13,500. The terms of the sale are 5/10, n/30. If the retailer sends a partial payment of $8,300 on the discount date, what is the net amount still due?
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