Question

Cost of Trade Credit

Grunewald Industries sells on terms of 1/10, net 40. Gross sales last year were $4,599,000 and accounts receivable averaged $495,000. 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 intermediate calculations. Round your answers to two decimal places.

Nominal cost:   %

Effective cost:   %

Answer 1

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ACCOUNTS latest - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins E AutoSum - Cut A A Wrap Text Calibri 11 General ECopy Fill в IU Merge & Center Insert Delete Format Paste $ % , +.0 .00 Conditional Format Cell Sort & Find & .00 0 Format Painter Clear Filter Select Formatting as Table Styles Clipboard Styles Editing Font Alignment Number Cells MH110 М; MA LZ MF LV LW LX LY МА МB МС MD МE MG МН MI MJ МК 109 4599000/365 = 110 SALES PER DAY 12600.00 111 DISCOUNT SALES =0.5 x 12600 6300,00 112 113 6300 x 10 days 63000 114 ACCOUNTS RECEIVABLE RELATED TO DISCOUNT CUSTOMERS = 115 116 ACCOUNTS RECEIVABLE RELATED TO NON -DISCOUNT CUSTOMERS = 432000.00 117 TOTAL ACCOUNT RECEIVABLE 495000 118 LESS: DISCOUNT CUSTOMERS RECEIVABLE = 63000.00 119 432000 120 121 DAYS SALES OUTSTANDING FOR 432000/6300 122 NON-DISCOUNT CUSTOMERS = 68.57 DAYS 123 SO COST OF TRADE CREDIT TO NON-DISCOUNT CUSTOMERS = 6.29% NOMINAL COST 124 (1/99)*365/(68.57-10) 125 126 EFFECTIVE COST = (1+ (1/99))^(365/58.57) 1= 6.46% EFFECTIVE COST 127 128 45 days cycle ROE, BV MV ratio dupont CASH BUDGETbudget VARIANCE float B-S profit loss ove FIFO BEP, OL FL ratios DETROIT SALES BUDGET DIFF ANALYSIS II Rea erences: R46 120% FFF WA 09:52 ENG 28-11-2019