On July 22,a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10,net 60.If the company borrows money at 12% to pay for the purchase on the last day of the discount period and pays the loan off on the last day of the credit period,what would be the net savings for the company?
A)$99.50
B)$(20.43)
C)$84.57
D)$20.43
E)$(84.57)

Question

Quizplus · Accepted Answer

The company saves 2% of $5,250 by paying early, which is $105. The cost of borrowing for 50 days (the difference between the discount period and the credit period) at 12% annual interest is $84.57. The net savings is $105 - $84.57 = $20.43.

On July 22,a Company Purchased Merchandise Inventory at a Cost