Little Store buys inventory using trade credit. The terms are stated as 3/10, n30, but Little...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Little Store buys inventory using trade credit. The terms are stated as 3/10, n30, but Little Store rides the credit and generally pays on the 45th day. Occasionally, payment is made as late as the 55th day. What is the approximate cost of the credit (using simple interest) in each case? What is the compound cost of credit in each case? Assume there are 365 days in a year. Round your answers to one decimal place. a. if paid on time Approximate interest rate: Compound interest rate: b. if paid on the 45th day Approximate interest rate: Compound interest rate: c. if paid on the 55th day Approximate interest rate: Compound interest rate: % % % % % % Little Store buys inventory using trade credit. The terms are stated as 3/10, n30, but Little Store rides the credit and generally pays on the 45th day. Occasionally, payment is made as late as the 55th day. What is the approximate cost of the credit (using simple interest) in each case? What is the compound cost of credit in each case? Assume there are 365 days in a year. Round your answers to one decimal place. a. if paid on time Approximate interest rate: Compound interest rate: b. if paid on the 45th day Approximate interest rate: Compound interest rate: c. if paid on the 55th day Approximate interest rate: Compound interest rate: % % % % % %
Expert Answer:
Answer rating: 100% (QA)
Answer To calculate the approximate cost of credit we need to use the formula for simple interest Interest Principal x Rate x Time Where Principal is the amount borrowed the value of the inventory pur... View the full answer
Related Book For
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
Posted Date:
Students also viewed these banking questions
-
Simplify the fraction. 13a8b5 26a7b
-
Little Store buys inventory using trade credit. The terms are stated as 2/10, n30, but Little Store rides the credit and generally pays on the 40th day. Occasionally, payment is made as late as the...
-
The post-closing trial balances of two proprietorships on January 1, 2010, are presented below. Patrick and Samuelson decide to form a partnership, Pasa Company, with the following agreed upon...
-
What is restricted cash? What are compensating balances? How should these items be reported on the statement of financial position?
-
At any moment in time, middle-aged people tend to have _________ incomes than both younger and older people do.
-
Great Lakes Pharmaceuticals, Inc. (GLPI) produces both prescription and over-the-counter medications. In January, GLPI introduces a new prescription drug, Capestan, to relieve the pain of arthritis....
-
Enhance the Treasury Yield Rates database file to perform a database query that finds the rate associated with any date and term.
-
Jenelle bought a home for $410,000, paying 12% as a down payment, and financing the rest at 5.2% interest for 30 years. Round your answers to the nearest cent. How much money did Jenelle pay as a...
-
New Horizons Co. is a high-tech firm whose owner does not have the required management expertise to run the firm. The owner wants to hire a manager with the required expertise. The continued success...
-
QUESTION 9 XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $46,000. It would be depreciated straight-line to $0 over 2 years. In 2...
-
"Capital budgeting has the same focus as accrual accounting." Do you agree? Explain you answer.
-
What methodologies can be used to assess the conciseness of academic writing, and how can scholars balance the demands for thoroughness with the need for succinct articulation of complex concepts ?
-
What do you understand by the title of the video - "Culture Eats Strategy for Breakfast"? Discuss the relevancy of culture and strategy in Human Resources, particularly in recruitment and selection....
-
describe what is meant by "income security", and what approaches you believe are the most appropriate to assure a minimum level of income to individuals, families, and households, regardless of their...
-
Direct labor-hours Estimated Data Manufacturing overhead Direct labor-hours Machine-hours Job A Machine-hours Machining $ 4,212,000 Assembly $ 324,000 18,000 234,000 234,000 13,000 Machining Assembly...
-
1. compare two HRIS, E-volution, people solution Workday, finance, and human resources system 2. Compare the Prons and Cons of each of them. 3. Which one would you recommend using and why? 4. add web...
-
Keating & Partners is a law firm specializing in labour relations and employee-related work. It employs 25 professionals (5 partners and 20 managers) who work directly with its clients. The average...
-
You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio...
-
If a mutual fund's net asset value is $23.40 and the fund sells its shares for $25, what is the load fee as a percentage of the net asset value?
-
A Long-term Equity AnticiPation Security (LEAPS) to buy stock at $25 expires after one year and currently sells for $4. The underlying stock is selling for $26. a. What is the intrinsic value and the...
-
of the Statement states that matching is not regarded as the driver of the recognition process. Explain what is meant by this and its probable effect in practice. 5 The replacement of accrual...
-
Financial accounting theory has accumulated a vast literature. A cynic might be inclined to say that the vastness of the literature is in sharp contrast to its impact on practice. (a) Describe the...
-
What is the basic difference between the purposes of financial and managerial accounting?
Study smarter with the SolutionInn App