You Are Offered the Following Terms: 5/25 Net 50

question 33

Multiple Choice

You are offered the following terms: 5/25 net 50.What is the effective annual interest rate for not paying on time, approximately?

• A)111.5%
• B)103.9%
• C)76.8%
• D)45.4%

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Definitions:

Accrued Wages

Wages that have been earned by employees but have not yet been paid by the company.

Wages Payable

A liability account reflecting the amount of salary or wages owed to employees for work performed but not yet paid.

Unearned Fees

Income received by a business for services that have not yet been performed or delivered.

Fees Earned

Revenue generated from providing services to clients or customers.