Calculate Discounts on Accounts Payable
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CPA Auditing and Attestation (AUD) › Calculate Discounts on Accounts Payable
If a firm's credit terms require payment within 45 days but allow a discount of 2 percent if paid within 15 days (using a 360 day year), the approximate cost/benefit of the trade credit terms is:
16%
48%
36%
24%
Explanation
\[360 / (45 - 15)\] * \[2% / (100% - 2%)\]
If a retailer's terms of trade are 3/10, net 45 with a particular supplier, what is the cost on an annual basis of not taking the discount? Assume a 360 day year.
31.81%
24.74%
36%
37.11%
Explanation
\[360 / (45 - 10)\] * \[3% / (100% - 3%)\]
A firm purchased \$10,000 of merchandise inventory on May 1. The terms of the purchase were 2/10, net 30. The company would pay what amount on May 9?
\$9,800
\$9,980
\$10,000
\$7,000
Explanation
A 2% discount on \$10,000 = a \$200 discount. $10,000 - $200 = \$9,800.
If the dollar price of the euro rises, which of the following will occur?
The euro will buy fewer European goods
The euro depreciates against the dollar
The euro will buy fewer US goods
The dollar depreciates against the euro
Explanation
If the dollar price of the euro rises, then the euro is getting more expensive, thus the dollar is getting less expensive.
One euro will buy US \$1.48 and a British pound will buy US \$2.06. What is the cross rate of euros per pound?
1.48
1.39
2.06
0.72
Explanation
2.06/1.48=1.39
A discount on accounts payables would encourage which of the following activities?
Clients paying their bills earlier rather than later
Clients paying more than they owe
Customers extending their due dates
None of the answer choices are correct
Explanation
When offering a discount to a customer for paying earlier, a firm would forfeit some income in order to increase cash on hand.