Question
You will use the following information to answer two questions. Memorial Hospital purchases $10,000,000 in medical supplies from Consolidate Supplies. The terms of purchases are
You will use the following information to answer two questions.
Memorial Hospital purchases $10,000,000 in medical supplies from Consolidate Supplies. The terms of purchases are 3/10 net 30. Currently Memorial is paying Consolidated the full amount due on day 30 but is considering taking the discount by paying on day 10. Memorial can obtain a bank loan with a 8% annual interest rate.
What is the true cost of the supplies? Use the format X,XXX,XXX.XX.
What is the amount of free trade credit that Memorial obtains from Consolidated assuming 360 days per year? Use the format X,XXX,XXX.XX.
What is the amount of costly trade credit? Use the format X,XXX,XXX.XX.
What is the approximate annual interest rate of the costly trade credit?
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Fundamental Accounting Principles Volume II
Authors: Larson Kermit, Jensen Tilly
14th Canadian Edition
71051570, 0-07-105150-3, 978-0071051576, 978-0-07-10515, 978-1259066511
