Use the Information to Answer the Following Question(s)

question 22

Multiple Choice

Use the information to answer the following question(s) .
SureDrip Irrigation Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to SureDrip is available at an annual rate of 9.6%. SureDrip has just purchased $400,000 of plastic chips from Sun Chemical.
-Refer to Instruction 18.1.Should SureDrip take the discount offered by Sun Chemical?

• A)Yes, SureDrip will get to use their raw materials 35 days earlier than if they waited to pay at the end of the 45 days.
• B)No, SureDrip will not have to pay any interest if they just pay in 45 days.
• C)Yes, SureDrip's short term borrowing rate of 9.6% is less than Sun's offered cost of carry of 22.9%.
• D)No, it costs SureDrip 22.9% to accept the discount and they are better off paying the full amount in 45 days.

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Definitions:

Testimonial Self-incrimination

The act of making statements or providing evidence that directly or indirectly implicates oneself in a criminal activity, protected against by the Fifth Amendment in the United States.

Fifth Amendment

Part of the U.S. Constitution's Bill of Rights protecting individuals from self-incrimination, double jeopardy, and guaranteeing due process of law.

Criminal Case

A legal proceeding brought by the state against an individual or entity accused of violating criminal law.

Miranda Rights

A set of rights that law enforcement officials are required to read to individuals upon arrest, informing them of their rights to silence and legal counsel.