If a Company Is Given Credit Terms of 2/10 N/30

question 231

Multiple Choice

If a company is given credit terms of 2/10 n/30 it should

• A) hold off paying the bill until the end of the credit period while investing the money at 10% annual interest during this time.
• B) pay within the discount period and recognize a savings.
• C) pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill.
• D) recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.

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Definitions:

Process Cost Systems

Accounting systems used to apply costs to similar products that are mass-produced in a continuous fashion, enabling consistent unit cost calculation.

Similar Products

Goods that satisfy the same customer needs or desires and are often interchangeable in use or consumption.

Activities Performed

The actions or operations carried out by an individual or organization in pursuit of certain objectives.

Equivalent Units

A concept used in cost accounting to express the amount of work done on incomplete products in terms of fully completed units of output.