Sam Wainwright is a new accountant with Ground Floor Company.Ground Floor purchased merchandise on account for $18,000.The credit terms are 1/10, n/30.Sam has talked with the company's banker and knows that he could earn 4% on any money invested in the company's savings account.
Instructions
(a) Should Sam pay the invoice within the discount period or should he keep the $18,000 in the money market account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would 1.(b) If Sam forgoes the discount, it may be viewed as paying an interest rate of 1% for the use of $18,000 for 20 days.Calculate the annual rate of interest to which this is equivalent.

Question

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The Answer of Sam Wainwright is a new accountant with Ground Floor Company.Ground Floor purchased merchandise on account for $18,000.The credit terms are 1/10, n/30.Sam has talked with the company's banker and knows that he could earn 4% on any money invested in the company's savings account.
Instructions
(a) Should Sam pay the invoice within the discount period or should he keep the $18,000 in the money market account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would 1.(b) If Sam forgoes the discount, it may be viewed as paying an interest rate of 1% for the use of $18,000 for 20 days.Calculate the annual rate of interest to which this is equivalent.

Sam Wainwright Is a New Accountant with Ground Floor Company