Perpetual Inventory - Purchase Discounts Video Lessons

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Problem: When a company is given credit terms of 2/10, n/30, it should a. pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill. b. recognize that the supplier is desperate for cash and withhold payment while negotiating a lower sales price. c. pay within the discount period and recognize a savings. d. hold off paying the bill until the end of the credit period, and invest at 10% annual interest during this time.

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Problem Details

When a company is given credit terms of 2/10, n/30, it should

a. pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill.

b. recognize that the supplier is desperate for cash and withhold payment while negotiating a lower sales price.

c. pay within the discount period and recognize a savings.

d. hold off paying the bill until the end of the credit period, and invest at 10% annual interest during this time.

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Based on our data, we think this problem is relevant for Professor Sollfrey's class at STATEN ISLAND CUNY.