Question

You place an order for 2,700 units of Good X at a unit price of $64. The supplier offers terms of 1/15, net 40.

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? (Enter your answer as a percent.)

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	Number of Days		days
a-2	Remittance
b-1	Discount Rate		%
b-2	Number of Days		days
b-3	Remittance
c-1	Implicit Interest
c-2	Days' Credit		days

Answer 1

a. There are 40 days to until account is overdue.

a-2 Remittance = Units of goods * Unit price

= 2,700 * $64

= $172,800

b-1 There is a 1% discount offered. If you take discount you will only have to remit.

b-2 There is a 15 days of discount period. If you take discount you will only have to remit.

b-3 Remittance = (1 - discount) * full period remittance

= (1 - 0.1) * $172,800

= $155,520

c-1 {Implicit interest is the difference between two remittance}

Implicit Interest = Full period remittance (a2) - Discount remittance (b3)

= $172,800 - $155,520

= $17,280

c-2 Days credit = Net days - Discount period

= 40 days - 15 days

= 25 days