Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / 1)A firm purchases merchandise on terms of 2/15, net 40 days
1)A firm purchases merchandise on terms of 2/15, net 40 days. It does not take discounts, and it typically pays on time, 40 days after the invoice date. Net purchases amount to €784,000 per year. Assume a 365-day year, and note that purchases are net of discounts. What are the amounts of Free trade credit and Costly trade credit the firm receives during the year?
2)Suppose the credit terms offered to your firm by its suppliers are 2/10, net 30 days. Your firm is not taking discounts, but is paying after 25 days instead of waiting until Day 30. You point out that the nominal cost of not taking the discount and paying on Day 30 is approximately 37%. But since your firm is neither taking discounts nor paying on the due date, what is the effective annual percentage cost of its non-free trade credit, using a 365-day year?
3)You've collected the following information about a company: Assets Cash Marketable securities 13,000 2,000 3,000 Accounts receivable 42,000 Inventory Current assets Machines Liabilities and Equity Accounts payable 19,000 Notes payable 6,000 Current liabilities Long-term debt 95,000 Total liabilities Paid-in capital 20,000 Retained earnings Equity Total liab. & equity 34,000 80,000 Real estate Fixed assets Total assets Part 1 - Attempt 2/7 for 10 pts. What are total assets? 0+ decimals Previous answers: 114000 Submit - Attempt 1/7 for 10 pts. Part 2 What is total equity? 0+ decimals Submit
Attempt 1/7 for 10 pts. Part 3 What is retained earnings? 0+ decimals Submit
1)Net purchases per day = 784/365 =$ 2,148Total trade credit = Net days*Net purchases per day = 2148*40 =$ 85,920Free credit*Net purchases per day = 2148*15 =$ 32,220Costly credit = Total credit-Free credit =$ 53,700
2)Effective Annual Rate = (1+r)^n-1
n = 365/(25-10) = 24.33
r = 2/100 - 2 (2 is the percentage of discount)= 0.0204
=(1+0.0204)^ 24.33
= 63.45% Or 63.5%.
3)
1)
Total Assets = Current Assets + Fixed Assets
Total Assets = [$13,000 + $2,000 + $3,000 + $42,000] + [$34,000 + $80,000]
Total Assets = [$60,000] + [$114,000]
Total Assets = $174,000
2)
Total Equity = [Total liabilities and Equity] - [Total Liabilities]
Total Liabilities = $19,000 + $6,000 + $95,000 = $120,000
Total liabilities and Equity = Total Assets = $174,000
Total Equity = $174,000 - $120,000 = $54,000
3)
Retained Earnings = Total Equity - paid in capital
Retained Earnings = $54,000 - $20,000
Retained Earnings = $34,000
Answers are
Total Assets = $174,000
Total Equity = $54,000
Retained Earnings = $34,000
