FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Dome Metals has credit sales of $450,000 yeariy with credit terms of net 45 days, which is also the average collection perlod.
a. Assume the fnrm offers a 2 percent discount for payment in 18 days and every customer takes advantage of the discount. Also
assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 12 percent. What will the
net gain or loss be to the firm if this discount is offered? (Use a 360-day year.)
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Transcribed Image Text:Dome Metals has credit sales of $450,000 yeariy with credit terms of net 45 days, which is also the average collection perlod. a. Assume the fnrm offers a 2 percent discount for payment in 18 days and every customer takes advantage of the discount. Also assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 12 percent. What will the net gain or loss be to the firm if this discount is offered? (Use a 360-day year.)
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