Spartan, Inc., regularly provides services to Grieder Supply on terms 3/10, n/40 and records sales at gross. During a recent month, the two firms engaged in the following transactions:
a. Spartan sold merchandise with a list price of $250,000.
b. Spartan sold merchandise with a list price of $75,000.
c. Grieder paid for the purchase in transaction a within the discount period.
d. Grieder paid for the purchase in transaction b after the discount period.
Required:
1. Provide the journal entries for Spartan to record the sales in a and b (make separate entries).
2. Provide the journal entry to record Grieder’s payment in c.
3. Provide the journal entry to record Grieder’s payment in d.
4. What implied annual interest rate is Grieder incurring by failing to take the sales discount and, instead, paying the gross amount after 40 days?