Simple Simon’s Bakery purchases supplies on terms of 1/10, Net 25. If Simple Simon’s chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon’s owner an interest rate of 12% on borrowed funds and no origination fees. Should Simple Simon’s enter the loan agreement with the bank in order to begin taking the discount?
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Simple Simon’s Bakery purchases supplies on terms of 1/10, Net 25. If Simple Simon’s chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon’s owner an interest rate of 12% on borrowed funds and no origination fees. Should Simple Simon’s enter the loan agreement with the bank in order to begin taking the discount?
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- Simple Simon's Bakery purchases supplies on terms of 1.7/10, net 25. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.2% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use 365 days for a year.) The cost of forgoing the discount is %. (Round to one decimal place.) Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Select the best choice below.) A. Simple Simon's should enter into the loan agreement with the bank and begin taking the discount. B. Simple Simon's should not enter into the loan agreement but should begin taking the discount. C. Simple Simon's should enter into the loan agreement but not begin taking the discount. D. Need more information to answer the question.Simple Simon's Bakery purchases supplies on terms of 1.1/10, net 25. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.6% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use 365 days for a year.) The cost of forgoing the discount is %. (Round to one decimal place.) Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Select the best choice below.) A. Simple Simon's should enter into the loan agreement but not begin taking the discount. B. Need more information to answer the question. OC. Simple Simon's should enter into the loan agreement with the bank and begin taking the discount. D. Simple Simon's should not enter into the loan agreement but should begin taking the discount.Simple Simon's Bakery purchases supplies on terms of 1.5/10, net 30. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.9% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use 365 days for a year.)
- A firm is offered credit terms of 2/10 net 45 by most of its suppliers. The firm also has a credit line available at a local bank at an interest rate of 12 percent. What is the cost of giving up the cash discount? Should the company take the cash discount or finance the purchase with the line of credit?Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table: Customer Accounts Receivable Average age of account Average payment period of customer A $11,000 42 days 50 days B $25,000 70 days 65 days C $10,000 48 days 45 days D $28,000 55 days 50 days E $14,000 50 days 60 days F $19,000 21 days 35 days G $30,000 10 days 30 days H $16,000 25 days 40 days…Retailers that accept credit cards pay a “swipe fee” to credit-card issuers such as Visa and Mastercard ranging from 1 to 3 percent of the purchase. The credit-card companies prohibited retailers from passing that fee on to consumers, but a recent lawsuit settlement proposal lifted that restriction. Under the settlement, retailerscan charge 2.5 to 3 percent on each transaction. Discuss this issue and develop a report on the pros and cons of retailers adding a surcharge to credit purchases.
- Retailers that accept credit cards pay a “swipe fee” to credit-card issuers such as Visa and Mastercard ranging from 1 to 3 percent of the purchase. The credit-card companies prohibited retailers from passing that fee on to consumers, but a recent lawsuit settlement proposal lifted that restriction. Under the settlement, retailers can charge 2.5 to 3 percent on each transaction. Discuss this issue and develop a report on the pros and cons of retailers adding a surcharge to credit purchases. (AACSB: Written and Oral Communication; Reflective Thinking)Slingshot Machine Tool Co. owes $40,000 to one of its suppliers. The supplier has offered a trade discount of 2/10 net 30. Slingshot can borrow the funds from either of two banks: First City Bank will loan the funds for 20 days at a cost of $400; Upstart Bank offers a discounted loan for 20 days at a cost of $320. -What is the cost of failing to take the discount? -What is the effective interest rate on each of the loans? -Should Slingshot take the cash discount?-Which bank loan should Slingshot use?The Reynolds Corporation buys from its suppliers on terms of 2/15, net 55. Reynolds has not been utilizing the discounts offered and has been taking 55 days to pay its bills. Ms. Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of 21 percent. The bank requires a 29 percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement. Calculate the cost of not taking a cash discount. Note: Use a 360 day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Calculate the effective rate of interest if the company borrows from the bank. Note: Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Do you agree with Duke's proposal? multiple choice No Yes
- If a company accepts credit cards, they must record the expense on their books. Please prepare the journal entries for the following scenario: Company A sells $480,000 on credit card sales. The credit card charges a 4.5% fee for the use of the card. The card company also deposits the cash into the company’s bank account the same night as the credit cards are accepted.Clark’s Landscaping bills customers subject to terms 2/25, n/60. Required: Compute the annual interest rate implicit in the sales discount. If his bank charges 17 percent interest, should the customer borrow from the bank so that he can take advantage of the discount?Tuckahoe Hospital wishes to establish a line of credit with a bank. FIRST Bank terms call for a $500,000 maximum loan with an interest rate of 4% and a $2,000 fee. SECOND Bank terms call for a $500,000 maximum loan with an interest rate of 5% but no fee. The compensating balance requirement is 5% of the total line of credit for either bank. What is the effective interest rate for Tuckahoe Hospital from SECOND Bank if 50% of the total amount were used during the year?