A Firm Buys on Terms of 2/8,net 45 Days,it Does

question 50

Multiple Choice

A firm buys on terms of 2/8,net 45 days,it does not take discounts,and it actually pays after 58 days.What is the effective annual percentage cost of its non-free trade credit? (Use a 365-day year.)

• A)14.34%
• B)15.10%
• C)15.89%
• D)16.69%
• E)17.52%

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Definitions:

Time Period Assumption

An accounting principle that allows businesses to divide their activities into specific time periods, such as months, quarters, or years, for reporting purposes.