Gonzales Company Currently Uses Maximum Trade Credit by Not Taking

question 21

Multiple Choice

Gonzales Company currently uses maximum trade credit by not taking discounts on its purchases.The standard industry credit terms offered by all its suppliers are 2/10,net 30 days,and the firm pays on time.The new CFO is considering borrowing from its bank,using short-term notes payable,and then taking discounts.The firm wants to determine the effect of this policy change on its net income.Its net purchases are $11,760 per day,using a 365-day year.The interest rate on the notes payable is 10%,and the tax rate is 40%.If the firm implements the plan,what is the expected change in net income?

• A)$32,964
• B)$34,699
• C)$36,526
• D)$38,448
• E)$40,370

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Definitions:

Human Perception

The process by which humans interpret and make sense of sensory information from the environment.

Gains the Ability to See

The development or restoration of the capacity for vision or sight.

Lightness Constancy

The visual perception phenomenon whereby the perceived color or brightness of objects remains constant despite changes in illumination.

Relative Luminance

The brightness of an object compared to the brightness of a similarly illuminated object that appears to be white or highly reflective.