Determine the cost of giving up cash discounts

Determine the cost of giving up cash discounts - 100 2 45...

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Determine the cost of giving up cash discounts under each of the following terms of sale. Cost of giving up discount % discount days in a year = -------------------------- X ------------------------------------------- (100 - % discount) (payment date – discounted period (a) 2/10 net 30 2 365 = ----------- X ------------ = ( 2 / 98 )( 365 / 20 ) = 0.3724 or 37.24% 100 – 2 30 – 10 (b) 1/10 net 30 1 365 = ----------- X ------------ = ( 1 / 99 )( 365 / 20 ) = 0.1843 or 18.43% 100 – 1 30 – 10 (c) 2/10 net 45 2 365 = ----------- X ------------ = ( 2 / 98 )( 365 / 35 ) = 0.2128 or 21.28%
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Unformatted text preview: 100 2 45 10 (d) 3/10 net 45 3 365 = ----------- X ------------ = ( 3 / 97 )( 365 / 35 ) = 0.3225 or 32.25% 100 3 45 10 (e) 1/10 net 60 1 365 = ----------- X ------------ = ( 1 / 99 )( 365 / 50 ) = 0.0737 or 7.37% 100 1 60 10 (f) 3/10 net 30 3 365 = ----------- X ------------ = ( 3 / 97 )( 365 / 20 ) = 0.5644 or 56.44% 100 3 30 10 (g) 4/10 net 180 4 365 = ----------- X ------------ = ( 4 / 96 )( 365 / 170 ) = 0.089 or 8.9% 100 4 180 10...
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This note was uploaded on 08/22/2011 for the course ACCOUNTING 201 taught by Professor Stevejoseph during the Winter '11 term at Aarhus Universitet.

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