Howes IncPurchases $4,562,500 in Goods Per Year from Its Sole Supplier

question 83

Multiple Choice

Howes Inc.purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50.If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.)

• A) 20.11%
• B) 21.17%
• C) 22.28%
• D) 23.45%
• E) 24.63%

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Definitions:

Office Equipment

Refers to the assets purchased by a business for use in its operations, such as computers, printers, and furniture.

Investing Activities

Investing activities include transactions involving the acquisition or disposal of non-current assets, such as property, plant, and equipment, or investments not related to the company's main business operations.

Realized Gain

The profit earned from the sale of an asset, which has been converted from an unrealized gain into actual cash or another form of payment.

Accounts Payable

Money owed by a business to its suppliers or creditors for goods and services received but not yet paid for.