Homework Answers
| a] | Amount of free trade credit = 400000*10/360 = | $ 11,111 |
| b] | Amount of costly trade credit = 400000*35/360 = | $ 38,889 |
| c] | Approximate annual cost [APR-without compounding] of the costly trade credit = (2.5/97.5)*(360/35) = | 26.37% |
| Effective interest rate [with compounding] of the costly trade credit = (1+2.5/97.5)^(360/35)-1 = | 29.75% | |
| d] | As the bank loan is cheaper by a large margin, the | |
| bank loan should be availed of and the trade credit | ||
| should be replaced. |
Add Answer to:
16.4 Langley Clinics, Inc., buys $400,000 in medical supplies each y (at gross prices) from its...
Langley Clinics, Inc., buys $400,000 in medical supplies a year (at gross prices) from its major...
Langley Clinics, Inc., buys $400,000 in medical supplies a year (at gross prices) from its major supplier, Consolidated Services, which offers Langley terms of 2.5/10, net 45. Currently, Langley is paying the supplier the full amount due on Day 45, but it is considering taking the discount, paying on Day 10, and replacing the trade credit with a bank loan that has a 10 percent annual cost. a. What is the amount of free trade credit that Langley obtains from...
Northeast Baptist buys $500,000 of a particular item (at gross prices) from its major supplier, Cardinal...
Northeast Baptist buys $500,000 of a particular item (at gross prices) from its major supplier, Cardinal Health, which offers NE Baptist terms of 3/20, net 60. Currently, the hospital is paying the supplier the full amount due on Day 60, but it is considering taking the discount, paying on Day 20 and replacing the trade credit with a bank loan that has a 12 percent rate. a. What is the amount of free trade credit that Baptist obtains from Cardinal...
Exercises #11 1. Xtra Corporation needs $50,000 for three months to finance its working capital. The company has arranged a short-term loan with a bank. The bank charges 8% annual interest rate wi...
Exercises #11 1. Xtra Corporation needs $50,000 for three months to finance its working capital. The company has arranged a short-term loan with a bank. The bank charges 8% annual interest rate with interest paid in advance. The bank also requires 5% of the borrowed amount as a compensating balance. Assume Xtra does not have money to serve as a compensating balance and pay interest upfront 1.1 How much Xtra have to borrow? 1.2 Find effective cost of bank loan...
6 (10 points). Newsome Inc. buys on terms of 3/15, net 45. It does not take...
6 (10 points). Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year? 7 (1 0 points). Below Enterprises. All of Deck operating liabilities. are the simplified current and projected financial statements for Decker er's assets are operating assets. All of Decker's current liabilities are Income statement Curent Projected Sales Costs Profit before tax Taxeor tax1,0001,500 Net income...
e) On November 30, Dizzy Controls Inc. borrowed $600,000 cash from its bank and signed a...
e) On November 30, Dizzy Controls Inc. borrowed $600,000 cash from its bank and signed a two-year promissory note bearing 7.4% annual interest due on the last day of the month. DATE ACCOUNT NAMES DEBIT CREDIT On November 29, Dizzy Controls Inc. issued a check for $82,400 to its accountant, Cooper Lybrand, for accounting services used to setup the company. DATE ACCOUNT NAMES DEBIT CREDIT On December 1, Dizzy Controls Inc. signed a two-year contract with Deluca Fix-it Corp. for...
The following items were selected from among the transactions completed by Sherwood Co. during the current...
The following items were selected from among the transactions completed by Sherwood Co. during the current year: Mar. 1 Purchased merchandise on account from Kirkwood Co., $390,000, terms n/30. 31 Issued a 30-day, 10% note for $390,000 to Kirkwood Co., on account. Apr. 30 Paid Kirkwood Co. the amount owed on the note of March 31. Jun. 1 Borrowed $156,000 from Triple Creek Bank, issuing a 45-day, 8% note. Jul. 1 Purchased tools by issuing a $216,000, 60-day note to...
structions The following items were selected from among the transactions completed by Sherwood Co. during...
structions The following items were selected from among the transactions completed by Sherwood Co. during the current year. Mar. 1 31 Apr. Jun. 30 1 Purchased merchandise on account from Kirkwood Co., $300,000, terms 1/30. Issued a 30-day, 4% note for $300,000 to Kirkwood Co., on account. Paid Kirkwood Co. the amount owed on the note of March 31 Borrowed 5156,000 from Triple Creek Bank, issuing a 45-day, 4% note. Purchased tools by issuing a $228,000, 60-day note to Poulin...
Tony and Suzie graduate from college in May 2021 and begin developing their new business. They...
Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain bikina or kayaking. Upon developing a customer base, they'll hold their first adventure races. These races will involve four-person teams that race from one checkpoint to the next using a combination of kayaking, mountain biking, orienteering, and trail running. In the long run, they plan to sell outdoor gear and develop a ropes...
June 1: Byte of Accounting, Inc. issued 2,580 shares of its common stock to Jeremy after...
June 1: Byte of Accounting, Inc. issued 2,580 shares of its common stock to Jeremy after $30,160 in cash and computer equipment with a fair market value of $44,660 were received. June 1: Byte of Accounting, Inc. issued 1,962 shares of its common stock after acquiring from Courtney $42,050 in cash, computer equipment with a fair market value of $13,920 and office equipment with a fair value of $928. June 1: Byte of Accounting, Inc. acquired $69,600 in cash from...
Tony and Suzie graduate from college in May 2021 and begin developing their new business. They...
Tony and Suzie graduate from college in May 2021 and begin
developing their new business. They begin by offering clinics for
basic outdoor activities such as mountain biking or kayaking. Upon
developing a customer base, they’ll hold their first adventure
races. These races will involve four-person teams that race from
one checkpoint to the next using a combination of kayaking,
mountain biking, orienteering, and trail running. In the long run,
they plan to sell outdoor gear and develop a ropes...
Exercises #11 1. Xtra Corporation needs $50,000 for three months to finance its working capital. The company has arranged a short-term loan with a bank. The bank charges 8% annual interest rate with interest paid in advance. The bank also requires 5% of the borrowed amount as a compensating balance. Assume Xtra does not have money to serve as a compensating balance and pay interest upfront 1.1 How much Xtra have to borrow? 1.2 Find effective cost of bank loan...
6 (10 points). Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year? 7 (1 0 points). Below Enterprises. All of Deck operating liabilities. are the simplified current and projected financial statements for Decker er's assets are operating assets. All of Decker's current liabilities are Income statement Curent Projected Sales Costs Profit before tax Taxeor tax1,0001,500 Net income...
e) On November 30, Dizzy Controls Inc. borrowed $600,000 cash from its bank and signed a two-year promissory note bearing 7.4% annual interest due on the last day of the month. DATE ACCOUNT NAMES DEBIT CREDIT On November 29, Dizzy Controls Inc. issued a check for $82,400 to its accountant, Cooper Lybrand, for accounting services used to setup the company. DATE ACCOUNT NAMES DEBIT CREDIT On December 1, Dizzy Controls Inc. signed a two-year contract with Deluca Fix-it Corp. for...
structions The following items were selected from among the transactions completed by Sherwood Co. during the current year. Mar. 1 31 Apr. Jun. 30 1 Purchased merchandise on account from Kirkwood Co., $300,000, terms 1/30. Issued a 30-day, 4% note for $300,000 to Kirkwood Co., on account. Paid Kirkwood Co. the amount owed on the note of March 31 Borrowed 5156,000 from Triple Creek Bank, issuing a 45-day, 4% note. Purchased tools by issuing a $228,000, 60-day note to Poulin...
Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain bikina or kayaking. Upon developing a customer base, they'll hold their first adventure races. These races will involve four-person teams that race from one checkpoint to the next using a combination of kayaking, mountain biking, orienteering, and trail running. In the long run, they plan to sell outdoor gear and develop a ropes...
Tony and Suzie graduate from college in May 2021 and begin
developing their new business. They begin by offering clinics for
basic outdoor activities such as mountain biking or kayaking. Upon
developing a customer base, they’ll hold their first adventure
races. These races will involve four-person teams that race from
one checkpoint to the next using a combination of kayaking,
mountain biking, orienteering, and trail running. In the long run,
they plan to sell outdoor gear and develop a ropes...
Most questions answered within 3 hours.
-
find the critical value associated with a right sided hypothesis of
the mean using a sample...
asked 1 hour ago -
Which of the following statements is true with respect to a
simple linear regression model?
a....
asked 2 hours ago -
The energy required to remove an electron from a surface of a
solid element is called...
asked 3 hours ago -
How would you train your employees to avoid risks of using
mobile devices?
asked 3 hours ago -
Assume Kw = 1.01 ✕ 10−14
For pure water, we can calculate [H3O+ ] = [OH...
asked 4 hours ago -
Suppose that on a temperature scale X, water boils at 203.0°X
and freezes at -105.7°X. What...
asked 5 hours ago -
BaS crystallizes in a cubic unit cell with S2- ions on each
corner and each face....
asked 6 hours ago -
A. 0≤P(Oi)≤10≤P(Oi)≤1 for each i
B. P(Oi)≤0P(Oi)≤0
C. P(Oi)=1+P(OCi)P(Oi)=1+P(OiC)
D. P(Oi)≥1P(Oi)≥1
If an experiment consists of...
asked 7 hours ago -
A battery has an emf of 9.20V and an internal resistance of 1.20
ohm. a)What resistance...
asked 7 hours ago -
The area of an elastic circular loop decreases at a constant
rate, dA/dt = −6.60×10−3 m2/s...
asked 8 hours ago -
The denaturation of proteins can be described by the
equilibrium
F⇌U
where F and U represent...
asked 10 hours ago -
Please answer what the maximum and minimum force is, and the
angle on the ion is...
asked 10 hours ago