A 2/10,net 30 Credit Policy

question 21

Multiple Choice

A 2/10,net 30 credit policy:

• A)is an expensive form of short-term credit if a buyer foregoes the discount.
• B)provides cheap financing to the buyer for 30 days.
• C)is an inexpensive means of reducing the seller's collection period if every customer takes the discount.
• D)tends to have little effect on the seller's collection period.
• E)tends to increase a firm's investment in receivables as compared to a straight net 30 policy.

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Definitions:

Year-End Balance

The financial position of an account at the end of the fiscal year after all debits and credits are taken into account.

Paid-In Capital

Funds received from investors in exchange for stock, representing the capital provided by shareholders through the purchase of shares.

Par Value

The stated or principal value of a bond, stock share, or coupon as specified on its certificate or document.

Journal Entries

Journal entries are the record of financial transactions in the accounting books, detailing debts and credits for each account affected by the transaction.