Exercise $10-24($Algo$)$ Purchase Discounts $[$LO $10-2,10-4]$

It is typically beneficial for companies to take advantage of early$-$payment discounts allowed on purchases made on credit. To see why this is the case, determine the effective rate of interest associated with not taking advantage of the early$-$payment discount for each of the following situations. Assume in each case that payment is made on the $60$th day of the billing cycle.

Required:

What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: $\frac{5}{30},\frac{n}{60}?$

What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: $\frac{4}{30},$ n$/60?$

To motivate managers to take early$-$payment discounts, what is the appropriate accounting treatment for purchase discounts?

Complete this question by entering your answers in the tabs below.

Required $1$

Required $2$

Required $3$

What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: $\frac{5}{30},\frac{n}{60}?($Do not round intermediate calculations. Enter your final answer as a percentage rounded to $2$ decimal places $($i$.$e$.,1524=15\mathrm{.}24\%).)$

Opporiunity cost