Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
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Textbook Question
Chapter 16, Problem 8P
Captain Whitman Ship Supplies offers terms of 3/15, net 45.
- a. If a purchaser takes the discount and pays on the 10th day, what is the nominal cost of trade credit?
- b. 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?
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Students have asked these similar questions
6. The purchasing document should also specify when payment is due. This is usually expressed as a net number of days, such as Net 30 or Net 45. A discount period may be included where the supplier specifies the amount of the discount as well as the number of days the buyer can make payments and still earn the discount. The discount period is often expressed as a formula: 2/20 Net 45
Provide solution for this question
A trade credit bill of $80,000 with
terms of sale of 2/5, net 30 means the
buyer saves
if the bill is paid
within the discount period
A:1600
How much discount will a buyer
receive if the buyer pays a trade credit
bill of $60,000 with terms of sale of 2/5,
net 30 on the net due date?
A: 0
Chapter 16 Solutions
Financial Management: Theory & Practice
Ch. 16 - Define each of the following terms:
Working...Ch. 16 - What are the two principal reasons for holding...Ch. 16 - Prob. 3QCh. 16 - Prob. 4QCh. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - What kinds of firms use commercial paper?
Ch. 16 - Prob. 1P
Ch. 16 - Medwig Corporation has a DSO of 17 days. The...Ch. 16 - What are the nominal and effective costs of trade...Ch. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Snider Industries sells on terms of 2/10, net 45....Ch. 16 - Calculate the nominal annual cost of trade credit...Ch. 16 - Captain Whitman Ship Supplies offers terms of...Ch. 16 - Grunewald Industries sells on terms of 2/10, net...Ch. 16 - The D.J. Masson Corporation needs to raise...Ch. 16 - Negus Enterprises has an inventory conversion...Ch. 16 - Prob. 12PCh. 16 - Payne Products had 1.6 million in sales revenues...Ch. 16 - Dorothy Koehl recently leased space in the...Ch. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - The Raattama Corporation had sales of 3.5 million...Ch. 16 - Start with the partial model in the file Ch16 P18...Ch. 16 - Prob. 1MCCh. 16 - Prob. 2MCCh. 16 - Prob. 3MCCh. 16 - Is there any reason to think that RR may be...Ch. 16 - Prob. 5MCCh. 16 - Johnson knows that RR sells on the same credit...Ch. 16 - Prob. 7MCCh. 16 - Prob. 8MCCh. 16 - What is the impact of higher levels of accruals,...Ch. 16 - Assume that RR purchases $200,000 (net of...Ch. 16 - Prob. 11MCCh. 16 - Prob. 12MCCh. 16 - Prob. 13MCCh. 16 - Prob. 14MCCh. 16 - Prob. 15MCCh. 16 - In an attempt to better understand RR’s cash...
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- Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date. a. 1/15, net 20 b. 2/10, net 60 c. 3/10, net 45 d. 2/10, net 45 e. 2/15, net 40arrow_forwardWhich of the following numbers represents the discount percentage applied if a customer pays within a discount window and credit terms are 3/15, n/60? A. 3 B. 15 C. 60 D. 3 and 15arrow_forwardYou place an order for 470 units of inventory at a unit price of $175. The supplier offers terms of 2/15, net 90. a-1. How long do you have to pay before the account is overdue? a-2. If you take the full period, how much should you remit? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b-1. What is the discount being offered? b-2. How quickly must you pay to get the discount? b-3. If you do take the discount, how much should you remit? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-1. If you don't take the discount, how much interest are you paying implicitly? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-2. How many days' credit are you receiving? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-1. Days until overdue a-2. Remittance b-1. Discount offered b-2.…arrow_forward
- PLEASE SHOW ALL WORK 14. Series discounts are a form of trade discount. (T or F) For Problems 15-19 assume that you purchase goods with a list price of $455 and a trade discount of 25%. The invoice is dated October 3 with terms of 3/15, n/45. 15. What is the net price after trade discount? 16 What is the last day you can take a cash discount? 17. What is the net amount due if you pay within the discount period? 18. If you do not pay within the discount period, what is the final date to pay the invoice? October 3 is day number 276; 19. If you do not pay within the discount period, what annual interest rate are you, in effect, paying the supplier? Express the rate with two decimal placesarrow_forwardA company has offered you credit terms of 3/20 net 60. The annual percentage cost to you of foregoing the discount is а. 54% b. 27% с. 18% d. 36% e. None of the above *Please show work!arrow_forwardWhat are the nominal and effective costs of trade credit under the credit terms of 2/20, net 40? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places. Nominal cost of trade credit: % Effective cost of trade credit: %arrow_forward
- If merchandise is sold on account to a customer for 1000 terms FOB shipping point, 1/10, n/30 and the seller prepays $50 in transportation costs, the amount of the discount for early payment would be:arrow_forwardWhich one of the following statements is correct if you purchase an item with credit terms of 3/15, net 45? Multiple Choice One-third of your purchase is due in 15 days and the rest is due in 45 days. If you pay within 15 days, you will receive a discount of 3 percent. If you pay within 3 days, you will receive a discount of 15 percent. If you do not pay within 15 days, you will be charged Interest at a rate of 3 percent per month. If you pay 3 percent of your purchases within 15 days, you will have 45 days to pay for the remainder.arrow_forwardSelect the items below that match the term: Credit terms of 2/10, n/30 A. the seller offers the purchaser a 2% cash discount regardless of when bill is paid B. the full amount is due in 30 days. C. the seller offers the purchaser a 2% cash discount if bill is paid within 30 days D. the seller offers the purchaser a 2% cash discount if bill is paid within 10 days Select all that apply.arrow_forward
- Outback Sporting Goods purchases merchandise on termsof 4/10, n/60. The company has a line of credit that enablesit to borrow money as needed from Northern Bank at anannual interest rate of 13 percent. Should Outback pay itssuppliers within the 10-day discount period if it must drawon its line of credit (borrow from Northern Bank) to makethese early payments? Explain.arrow_forwardThe credit terms offered to a customer by a Merchandise Business are 2/10, n/30, which means that a. The customer can deduct a 2% discount if the bill is paid within 30 days of the invoice date. The customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date. c. The customer must pay the bill within 10 days. d. The customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.arrow_forward2. A certain product payment offers 30/25 / 18/ 5 discounts. What is the total net price rate? 3. What is the price difference if a net price of Php 1,456.80 has a single discount of 40 % and a discount series of 20 % , 15 % , 5 %. 4. Compare the discount offer between a discount series of 20 % ,15 % and 10 % and a single discount of 45 % 5. Which discount will you chose in buying the same brand of air conditioning unit of Php 10,800. A discount of 15 % and 5 % or a discount of 10 % , 8 % , and 5%.arrow_forward
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