Filbeck Company buys on terms of 2/15,net 30 days.It does not take discounts,and it typically pays 30 days after the invoice date.Net purchases amount to $500,000 per year.On average,how much free trade credit does the firm receive during a 365-day year?

Question

Quizplus · Accepted Answer

Free trade credit is the credit available without any cost, which is the amount of credit available during the discount period. The discount period is 15 days, so the free trade credit is calculated as (15/365) * $500,000 = $20,548.

Filbeck Company Buys on Terms of 2/15,net 30 Days