Sam Wainwright is a new accountant with Ground floor Company. Ground floor purchased merchandise on account for

Question:

Sam Wainwright is a new accountant with Ground floor Company. Ground floor purchased merchandise on account for $18,000. The credit terms are 1/10, n/30. Sam has talked with the company's banker and knows that he could earn 4% on any money invested in the company's savings account.
Instructions
(a) Should Sam pay the invoice within the discount period or should he keep the $18,000 in the money market account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would be best.
(b) If Sam forgoes the discount, it may be viewed as paying an interest rate of 2% for the use of $18,000for 20 days. Calculate the annual rate of interest that this is equivalent to.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Question Posted: Sep 21, 2024 05:13 AM

See More Questions

The following information was drawn from the 2016 accounting records of Ozark Merchandisers: 1. Inventory that had cost $21,200 was sold for $39,900 under terms 2/20, net/30. 2. Customers returned...
What is the goal of conducting a systems review? What factors need to be considered during systems review?
Some physical systems possessing capacitance continuously distributed over space can be modeled as an infinite array of discrete circuit elements. Examples are a microwave waveguide and the axon of a...
Sam Wainwright is a new accountant with Ground floor Company. Ground floor purchased merchandise on account for $18,000. The credit terms are 1/10, n/30. Sam has talked with the company's banker and...
With milk sales sagging of late, The Milk Processor Education Program (MPEP) decided to move on from the famous "Got Milk" ad slogan in favor of a new one, "Milk Life." The new tagline emphasizes...
. Estimate the weighted average cost of capital appropriate for discounting the Collinsville plant's incremental cash flows. 2. . Project the incremental cash flows associated with the acquisition of...
Barge Co. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Barge for $840 each. Barge needs 1,200 clocks annually. Barge has provided the...
Putnam Enterprises currently purchases a total of 50,000 sensors annually from Utah Electronics at $80 per unit. The firm places 25 purchase orders during the year at an average cost of $10 per...
In the event of a dispute over the enforcement of a premarital contract, do you think the agreement should be treated like an ordinary contract or do you think a court should review it for...
Making sure that time is dedicated to problem - solving and post - performance review is an explicit part of: - Supportive learning environment. - Learning processes and practices. - Managers...
High-Low Method, Cost Formulas The controller of the South Charleston plant of Ravinia, Inc., monitored activities associated with materials handling costs. The high and low levels of resource usage...
In a research project the PMHNP is conducting, some patients are excluded from the project, so instead of randomizing subjects, the subjects are highly selected. This type of selection could produce...
The 15 tenure track professors in a university math department are paid an average of $90,000 per year, while the 10 adjunct professors are paid an average of $60,000 per year. What is the average...
9. Alicia is the project manager of the Cloud Managed Services team that works on the Spanish Telecom project. Recently the client sent a request for a custom cloud solution. The typical development...
An ideal monatomic gas initially has a temperature of 330 K and a pressure of 6.00 atm. It is to expand from volume 500 cm3 to volume 1500 cm3. If the expansion is isothermal, what are? (a) The final...
Phosgene, COCl2, is a toxic gas used in the manufacture of urethane plastics. The gas dissociates at high temperature. At 400oC, the equilibrium constant Kc is 8.05 104. Find the percentage of...
An apartment building in your neighborhood is for sale for $140,000. The building has four units, which are rented at $500 per month each. The tenants have long-term leases that expire in 5 years....
A new machine can be purchased today for $300,000. The annual revenue from the machine is calculated to be $67,000, and the equipment will last 10 years. Expect the maintenance and operating costs to...
AI Larson asked a bank to lend him money on January 1, based on the following repayment plan: the first payment would be $2 on February 28, with sub-sequent monthly payments increasing by $2 a month...
Thomas C. Company holds a 15% equity investment in Kayak Zone and treats it as a passive investment. Fred W. Company holds 30% of Kayak Zone's stock and has a significant influence over Kayak. On...
The following information pertains to Flaxman Manufacturing Company for April. Assume actual overhead equaled applied overhead. April 1 Inventory balances Raw materials Work in process Finished goods...
On December 1, 2021, your company borrowed $33,000, a portion of which is to be repaid each year on November 30. Specifically, your company will make the following principal payments: 2022, $4,400;...

Sam Wainwright is a new accountant with Ground floor Company. Ground floor purchased merchandise on account for

Question:

Step by Step Answer:

Dan should pay theinvoice within the discount peri...View the full answer

Students also viewed these Managerial Accounting questions