Compute the cost of not taking the following cash discounts

Accounting Feb 16, 2021

Compute the cost of not taking the following cash discounts. (Use a 360-day year. Do not round intermediate calculations. Input your final answers as a percent rounded to 2 decimal places.)
Cost of Lost Discount a. 2/14, net 35 ' cyo b. 3/15, net 45 % c. 4/10, net 60 % d. 3/13, net 160 %

Expert Solution

Computation of Cost of Not Taking the Cash Discounts:

Cost of Not Taking the Cash Discounts = Discount Rate/(1-Discount Rate) * 360/(Final Due Date-Discount Period)

a) 2/14, Net 35:

Cost of Not Taking the Cash Discounts = 2%/(1-2%) * 360/(35-14) = 34.99%

b) 3/15, Net 45:

Cost of Not Taking the Cash Discounts = 3%/(1-3%) * 360/(45-15) = 37.11%

c) 4/10, Net 60:

Cost of Not Taking the Cash Discounts = 4%/(1-4%) * 360/(60-10) = 30%

d) 3/13, Net 160:

Cost of Not Taking the Cash Discounts = 3%/(1-3%) * 360/(160-13) = 7.57%%

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