Sims Company regularly provides services to Lauber Supply on terms 1/15, n/30 and records sales at gross. During a recent month, the two firms engaged in the following transactions:
a. Sims provided services with a list price of $85,000.
b. Sims provided services with a list price of $30,000.
c. Lauber paid for the purchase in transaction a within the discount period.
d. Lauber paid for the purchase in transaction b after the discount period.
Required:
1. Prepare the journal entries for Sims to record the sales in a and b (make separate entries).
2. Prepare the journal entry to record Lauber’s payment in c.
3. Prepare the journal entry to record Lauber’s payment in d.
4. What implied annual interest rate is Lauber incurring by failing to take the sales discount and, instead, paying the gross amount after 30 days?