Gordon Enterprises Usually Takes 60 Days to Pay Its Suppliers

question 66

Multiple Choice

Gordon Enterprises usually takes 60 days to pay its suppliers. In order to encourage prompt payment, supplier Y offers Flash Enterprises a 2% discount for payment within 10 days. What is the annual percentage discount forgone if Flash Enterprises does not take up the discount offer?

• A)11%.
• B)14.6%.
• C)9.1%.
• D)1.5%.

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Definitions:

Expense Account

An account used to track expenditures or costs incurred by a business or an individual for operational purposes.

Asset Account

An account that tracks resources owned or controlled by a business or individual which have economic value.

Unearned Items

Income received for goods not yet delivered or services not yet provided, considered a liability until the goods or services are delivered.

Adjusting Journal Entry

Adjusting journal entries are made in the accounting records to correct or allocate transactions in the appropriate accounting period for accurate financial reporting.