02.07.2022 - 19:15

# Suppose a firm makes purchases of $3.1 million per year under terms of 2/10, net 30, and takes discounts. Assume 365 days in a year for your calculations. Do not round intermediate calculations. a. What is the average amount of accounts payable net of di Question: Suppose a firm makes purchases of$3.1 million per year under terms of 2/10, net 30, and takes discounts. Assume 365 days in a year for your calculations. Do not round intermediate calculations.

a. What is the average amount of accounts payable net of discounts? (Assume that the $3.1 million of purchases is net of discounts – that is, gross purchases are$3,163,265, discounts are $63,265, and net purchases are$3.1 million.) Round your answer to the nearest dollar. $_____. b. Is there a cost of the trade credit the firm uses? I. There is no cost of trade credit at this point. The firm is using ‘free’ trade credit. II. The cost of the trade credit is$254,795.

c. If the firm did not take discounts but it did pay on the due date, what would be its average payables? Round your answer to the nearest dollar. $_____. If the firm did not take discounts but it did pay on the due date, what would be its nominal cost? Round your answer to two decimal places. _____ % If the firm did not take discounts but it did pay on the due date, what would be its effective cost? Round your answer to two decimal places. _____ % d. What would the firm’s cost of not taking discounts be if it could stretch its payments to 45 days? Round your answers to two decimal places. Nominal cost _____ % Effective cost _ % Answers (1) • April 7, 2023 в 21:36 a. The average amount of accounts payable net of discounts is$2,991,667. This is calculated by subtracting the amount of discounts from the gross purchases ($3,163,265 -$63,265) and dividing by 365 days. b. The answer is I. There is no cost of trade credit at this point as the firm is using 'free' trade credit by taking the discount offered. c. If the firm did not take discounts but paid on the due date, its average payables would still be $2,991,667. This is because the terms of the trade credit do not affect the actual amount owed. The nominal cost of not taking discounts would be 10.0% (assuming a 360-day year) because the firm would be forgoing a 2% discount for paying early. The effective cost of not taking discounts would be 10.52% because the firm would be paying the full amount for an average of 20 days longer than if it took the discount. d. If the firm could stretch its payments to 45 days, its nominal cost of not taking discounts would be 8.16% (again assuming a 360-day year). The effective cost of not taking discounts would be 8.67%, calculated as follows: (1+0.0816/365)^45 - 1 = 2.26%. This is still lower than the effective cost of not taking the discount and paying on the due date. Do you know the answer? Not sure about the answer? Find the right answer to the question Suppose a firm makes purchases of$3.1 million per year under terms of 2/10, net 30, and takes discounts. Assume 365 days in a year for your calculations. Do not round intermediate calculations. a. What is the average amount of accounts payable net of di by subject Accounting, and if there is no answer or no one has given the right answer, then use the search and try to find the answer among similar questions.
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