The implied interest rate for postponing the payment

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Unformatted text preview: unt period to the due date: Cash discount lost if not paid within the discount period Net payment being postponed = $8,000/$792,000 = 0.010101 (ii) Convert the implied interest rate to annual basis: Daily interest = 0.010101/20 = 0.00051 Annual interest = 0.000505 X 365 = 18.43% Since McDowells cost of funds, 10%, is less than the implied interest rate for cash discount, 18.43%, it should continue the policy of taking the cash discount. CE 7-3 According to FASB ASC 860-10-05 (Overview and Background) > Types of Transfers 056 Transfers of financial assets take many forms. This guidance provides an overview of the following types of transfers discussed in this Topic: a. Securitizations b. Factoring c. Transfers of receivables with recourse d. Securities lending transactions e. Repurchase agreements f. Loan participations g. Bankers accept...
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