A Merchant Receives an Invoice for $8000 with Terms 2/10,n/50

question 70

Multiple Choice

A merchant receives an invoice for $8000 with terms 2/10,n/50.What is the maximum interest rate that the merchant could borrow money at to take advantage of the discount?

• A)18.62%
• B)18.25%
• C)14.90%
• D)14.60%

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Definitions:

Accounting

The systematic process of recording, analyzing, summarizing, and reporting financial transactions of a business or individual to ensure accurate financial statements.

Investments

Financial assets or items acquired with the intention of generating income or profit.

Significant Influence

The power to participate in the financial and operating policy decisions of another entity without having full control or joint control.

Fair Value Option

An accounting option allowing financial assets and liabilities to be recorded at their fair value, with changes in fair value recognized in the income statement.