Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 30, Problem 2PS
a)
Summary Introduction
To determine: The amount of discount.
b)
Summary Introduction
To determine: Effective annual
c)
Summary Introduction
To discuss: Payment terms based on given situations.
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Which of the following mathematical equations is used to compute the payables deferral period (DPO)?
000 о
Payables deferral period (DPO) = Accounts payable/Daily credit purchases
Payables deferral period (DPO) = Cost of goods sold/Accounts payables
Payables deferral period (DPO) = Daily credit purchases/Accounts payable
Payables deferral period (DPO) = Payables turnover 360
Payables deferral period (DPO) = Payables turnover/360
Salma Corporation sells on terms of net/90. Their accounts receivable are on average 20 days past due. If annual credit sales are P800,000, what is the company’s average investment in accounts receivable?
choose the letter of correct answera. P44,444.00b. P144,444.00c. P224,444.00d. P244,444.00e. P344,444.00
19.
Chapter 30 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 2PSCh. 30 - Prob. 3PSCh. 30 - Prob. 4PSCh. 30 - Prob. 5PSCh. 30 - Prob. 6PSCh. 30 - Prob. 7PSCh. 30 - Credit policy How should your willingness to grant...Ch. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 10PS
Ch. 30 - Prob. 11PSCh. 30 - Prob. 12PSCh. 30 - Prob. 13PSCh. 30 - Prob. 14PSCh. 30 - Credit terms Phoenix Lambert currently sells its...Ch. 30 - Prob. 16PSCh. 30 - Prob. 17PSCh. 30 - Prob. 18PSCh. 30 - Prob. 19PSCh. 30 - Prob. 20PSCh. 30 - Prob. 21PSCh. 30 - Prob. 22PSCh. 30 - Prob. 23PSCh. 30 - Prob. 24PSCh. 30 - Prob. 25PSCh. 30 - Money-market yields In Section 30-4 we described a...Ch. 30 - Money-market yields Look again at the previous...Ch. 30 - Prob. 29PSCh. 30 - Prob. 30PSCh. 30 - Prob. 31PSCh. 30 - Prob. 33PS
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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_forwardThe contra revenue account that represents the reduction in the amount paid by a credit customer if payment is made within a specified period of time is known as which of the following: O Contra revenue account O Sales allowance account O Sales discount account O Allowance for uncollectible accounts ASUS f3 f4 f5 f6 f7 f8 f9 f10 f11 区 ロ/京 %24 & 3 4. 7. 8 9. 01 Y U G H. J K 16 5 图arrow_forwardAssume 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 30arrow_forward
- Roswell Company purchasesinventory from Clear Pool Supplies on June 1. The sales terms on the invoice from Clear PoolSupplies are 3/10, n/30. What does this mean? What is Roswell’s potential savings, if any? Howmuch time does the company have to take advantage of these savings?arrow_forwardMcEwan Industries sells on terms of 3/10, net 40. Total sales for the year are $1,912,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 66 days after their purchases. Assume 365 days in year for your calculations. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. a. What is the days sales outstanding? Round your answer to two decimal places. 43.6 $ b. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations. days 228,452 c. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places. 3.09 %arrow_forwardA firm buys on terms of 2/15, net 50. It does not take discounts. It pays 60 days after invoice date. Net pruchses amount to $575,000 per year. What is the dollar amount of total trade credit the firm receives during the year i.e. what are its average account payable?arrow_forward
- A firm buys on terms of 2/10, net 30, but generally does not pay until 40 days after the invoice date. Its purchases totaled $1,095,000 per year. How much “non-free” trade credit does the firm use on average each year? What is the nominal cost of “non-free” trade credit? What is the effective cost rate of the costly credit?arrow_forward1. A company maintains an allowance for doubtful accounts related to its credit sales. For each credit sale, 1% is estimated to be uncollectible. A company recently made a credit sale of $50,000, and the cost of goods sold related to the transaction was $40,000. What journal entries should be made related to this sale? 2. A company estimates its future warranty obligations at the time a sale is made. This estimate is 2% of sales. The company recently sold $100,000 in a cash sale that had an associated cost of goods sold of $70,000. What journal entries should be made related to this sale?arrow_forwardbased on that solution just want to ask how find gross profit and net profit？arrow_forward
- Easy Company sells directly to retail customers. On January 1, 2020, the balance of the accounts receivable was P2,070,000 while the allowance for doubtful accounts was a credit of P78,000. The following data are gathered. Credit Sales Writeoffs Recoveries2017 11,100,000 260,000 22,0002018 12,250,000 295,000 37,0002019 14,650,000 300,000. 36,0002020 15,000,000. 310,000 42,000Doubtful accounts are provided for as a percentage of credit sales. The entity calculated the percentage annually by using the experience of the three years prior to the current year.Required:a. What is the percentage of credit sales to be used in computing doubtful accounts expense for 2020?b. What amount should be reported as doubtful expense for 2020?c. What amount should be reported as allowance for doubtful accounts on December 31, 2020?arrow_forwardPGL Corporation has a credit sale of $ 240,000 in 2018. The company estimates that 9 % of its credit sales will not be collected from customers. The amount of bad debts using the percent of sales method would be O a. $22,500 Ob. $24,800 O c. $16,600 O d. $21,600 4arrow_forward10. A bank note is discounted at 6% in order to take advantage of the cash discount On an invoice for $8,080.00 plus shipping charge of $42.00. The credit terms Are 2/15, n/45. a. What is the cash discount? $ _ Calculate the proceeds needed to pay the invoice in full taking advantage Of the cash discount: b.arrow_forward
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