3. Smart Inc. is going to purchase a $12,000 machine. The vendor offered a term of...

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3. Smart Inc. is going to purchase a $12,000 machine. The vendor offered a term of 3/15 net 45 of payment. a) If Smart take c

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Answer 1

Answer #1

Solution:-

(a) If Smart Inc take a Cash Discount when the company make payment & how much is payment

If the Company takes the Cash discount then the company is required to within 15 days to avail a 3% Cash discount.

Discount = $12,000*3% = $360

Payment made = $12,000 - $360 = $11,640

(b) If the company give up discount when and how much should company pay

If the not avail the Cash discount then the Company is Required to pay within 45 days

Payment made = $12,000

(c) What is the Cost of giving up discount

Formula:-

Discount / (1-Discount) * 360 / (full allowed payment days - discount days)

= 3% / (1- 3%) * 360 / (45 Days - 15 Days)

= (3% / 97%) * (360 / 30)

= 37.11%

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Answer 2

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