Annual credit sales of Nadak Co. total $680 million. The firm gives a 2% cash discount for

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Annual credit sales of Nadak Co. total $680 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% of Nadak’s accounts receivable are paid within the discount period.


Required:

a. What is the total amount of cash discounts allowed in a year?

b. Calculate the approximate annual rate of return on investment that Nadak Co.’s cash discount terms represent to customers who take the discount.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Accounting What the Numbers Mean

ISBN: 978-1260565492

12th edition

Authors: David Marshall, Wayne McManus, Daniel Viele

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