A Buyer Did Not Take Advantage of a Supplier's Credit

question 160

True/False

A buyer did not take advantage of a supplier's credit terms of 2/10, n/30, but instead paid the invoice in full at the end of 30 days. By not taking the discount the buyer lost the equivalent of 18% annual interest on the amount of the purchase.

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Definitions:

Bonds at Premium

Bonds sold for an amount higher than their face value, typically occurring when the coupon rate is above the current market rate of interest.

Journal Entries

The recording of financial transactions in a company's double-entry accounting system.

Bond Interest

The periodic payment made to bond investors, representing the interest earned on the bond's face value.

Amortization

The process of gradually writing off the initial cost of an asset over its useful life or the repayment of a loan over time through scheduled payments.