Question

You place an order for 560 units of Good X at a unit price of $67. The supplier offers terms of 1/10, net 30.

a.	How long do you have to pay before the account is overdue? What are your disbursement, collection, and net floats? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
b.	If you take the full period, how much should you remit? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
c.	What is the discount being offered? (Do not round intermediate calculations and enter your answer as a percent rounded to the nearest whole number, e.g., 32.)
d.	How quickly must you pay to get the discount? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
e.	If you do take the discount, how much should you remit? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
f.	If you don’t take the discount, how much interest are you paying implicitly? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
g.	How many days’ credit are you receiving? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Answer 1

Credit purchase = Units ordered * Purchase price
Credit purchase = 560 * $67
Credit purchase = $37,520

Credit term is 1/10, net 30.

Answer a.

You have to pay within 30 days before the account is overdue.

Disbursement = $37,520
Collection = $0

Net Floats = Disbursement - Collection
Net Floats = $37,520 - $0
Net Floats = $37,520

Answer b.

You have to pay within 30 days then you should remit $37,520.

Answer c.

Discount offered = 1%

Answer d.

You must pay within 10 days in order to avail discount.

Answer e.

Amount remitted = $37,520 - 1% * $37,520
Amount remitted = $37,144.80

Answer f.

If you don’t take the discount, then you are paying interest of $375.20 ($37,520 - $37,144.80).

Answer g.

Credit Period = 30 days - 10 days
Credit Period = 20 days