The cost of not taking the discount on trade credit of 3/10,net 30 is equal to:
A) 57.75%.
B) 55.67%.
C) 56.44%.
D) 36.50%.

Question

Quizplus · Accepted Answer

If the trade credit of 3/10,net 30 is not taken, then the full amount must be paid within 30 days. By not taking the discount, the cost of trade credit can be calculated as follows:

Cost of trade credit = (Discount % ÷ (100% - Discount %)) x (365 ÷ (Full allowed payment days - Discount period))
= (3% ÷ (100% - 3%)) x (365 ÷ (30 - 10))
= 0.0444 x 18.25
= 0.8091 or 80.91%

Therefore, the cost of not taking the discount on trade credit of 3/10,net 30 is 56.44%. Thus, the best choice is option C.

The Cost of Not Taking the Discount on Trade Credit