Question

Sybex Corp. sells its goods with terms of 4/10 EOM, net 30.
**What is the implicit cost of the trade credit?**
*Round to 4 decimal places and represent percentage as a
decimal.*

Answer #1

**Solution:**

The formula for calculating the implicit Cost of Trade Credit is

= [ Discount rate / (1 – Discount rate ) ] * [ 365 / (Total payment Period – period for which discount has been offered) ]

As per the information given in the question we have

Discount rate = 4 % = 0.04 ; No. of days in a period = 365 days ;

Total payment Period = 30 days ; Period for which discount has been offered = 10 days

Total payment Period – period for which discount has been offered = 30 – 10 = 20 days

Applying the above values in the formula we have

= [ 0.04 / ( 1 – 0.04 ) ] * [ 365 / ( 30 – 10 ) ]

= [ 0.04 / 0.96 ] * [ 365 / 20 ]

= 0.041667 * 18.25

= 0.760417

= 0.7604 ( when rounded off to four decimal places )

= 76.04 %

**Thus the Implicit cost of trade credit is =
0.7604**

Book Depot Inc. sells on terms of 3/15, net 50. What is the
implicit cost of trade credit under these terms? Use a 365-day
year.
Round the answer to two decimal places in percentage form.
(Write the percentage sign in the "units" box)

Book Depot Inc. sells on terms of 2/20, net 30. What is the
implicit cost of trade credit under these terms? Use a 365-day
year.

Book depot Inc . sells on terms of 2/20, net 75 . what is the
implicit cost of trade credit under these terms ! Use a 365 -day
year.

Lyman Nurseries purchased seeds costing
$28,000 with terms of 5/10
net 30 EOM on January 12. How much will the firm pay if it takes
the cash discount? What is the approximate cost of giving up the
cash
discount,
using the simplified formula?
The amount the firm will pay if it takes the cash discount
is
$.
(Round to the nearest dollar.)
The approximate cost of giving up the cash discount, using the
simplified formula, is
%.
(Round to two...

Problem 16-09
Cost of Trade Credit
Grunewald Industries sells on terms of 3/10, net 30. Gross sales
last year were $4,477,500 and accounts receivable averaged
$412,500. Half of Grunewald's customers paid on the 10th day and
took discounts. What are the nominal and effective costs of trade
credit to Grunewald's nondiscount customers? (Hint:
Calculate daily sales based on a 365-day year, calculate the
average receivables for discount customers, and then find the DSO
for the nondiscount customers.) Do not round...

McEwan Industries sells on terms of 3/10, net 40. Total sales
for the year are $1,870,500; 40% of the customers pay on the
10th day and take discounts, while the other 60% pay, on
average, 82 days after their purchases. Assume 365 days in year for
your calculations.
What is the days sales outstanding? Round your answer to two
decimal places.
What is the average amount of receivables? Round your answer to
the nearest cent. Do not round intermediate
calculations....

McEwan Industries sells on terms of 3/10, net 35. Total sales
for the year are $1,461,000; 40% of the customers pay on the
10th day and take discounts, while the other 60% pay, on
average, 50 days after their purchases. Assume 365 days in year for
your calculations.
What is the days sales outstanding? Round your answer to two
decimal places.
days
What is the average amount of receivables? Round your answer to
the nearest cent. Do not round intermediate...

McEwan Industries sells on terms of 3/10, net 40. Total sales
for the year are $1,775,000; 40% of the customers pay on the
10th day and take discounts, while the other 60% pay, on
average, 52 days after their purchases. Assume 365 days in year for
your calculations.
What is the days sales outstanding? Round your answer to two
decimal places.
days
What is the average amount of receivables? Round your answer to
the nearest cent. Do not round intermediate...

McEwan Industries sells on terms of 3/10, net 25. Total sales
for the year are $746,500; 40% of the customers pay on the
10th day and take discounts, while the other 60% pay, on
average, 52 days after their purchases. Assume 365 days in year for
your calculations.
What is the days sales outstanding? Round your answer to two
decimal places.
days
What is the average amount of receivables? Round your answer to
the nearest cent. Do not round intermediate...

McEwan Industries sells on terms of 3/10, net 30. Total sales
for the year are $1,326,00; 40% of the customers pay on the 10th
day and take discounts, while the other 60% pay, on average, 82
days after their purchases. Assume 365 days in a year for your
calculations.
d. What is the percentage cost of trade credit to customers who
do not take the discount and pay in 82 days?
Nominal cost %
Effective cost %
e. what would...

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