Hudson Supplies has net sales of $3 million and cost of goods sold of $2.2 million. A review of the firm's balance sheet reveals the following account levels: accounts receivable, $378,100; inventories, $290,500; and accounts payable, $241,200. Hudson offers credit terms of 2/10 net 30, and despite its customers, on average, paying late, Hudson has not imposed any penalties for late payment. What is the difference between the nominal cost of trade credit Hudson extends according to its credit terms versus the actual nominal cost of trade credit it extends (based upon how long customers take to pay off accounts)? Assume a 365-day year.

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The Answer of Hudson Supplies has net sales of $3 million and cost of goods sold of $2.2 million. A review of the firm's balance sheet reveals the following account levels: accounts receivable, $378,100; inventories, $290,500; and accounts payable, $241,200. Hudson offers credit terms of 2/10 net 30, and despite its customers, on average, paying late, Hudson has not imposed any penalties for late payment. What is the difference between the nominal cost of trade credit Hudson extends according to its credit terms versus the actual nominal cost of trade credit it extends (based upon how long customers take to pay off accounts)? Assume a 365-day year.

Hudson Supplies Has Net Sales of $3 Million and Cost