Grunewald Industries sells on terms of 3/10, net 30. Gross sales last year were
ID: 2650806 • Letter: G
Question
Grunewald Industries sells on terms of 3/10, net 30. Gross sales last year were $4,877,000, and accounts receivable averaged $403,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald's nondiscount customers? (Hint: Calculate sales/day based on a 365-day year; then get average receivables of discount customers; then find the DSO for the nondiscount customers.) Do not round intermediate calculations. Round your answers to two decimal places.
Nominal cost % Effective cost %Explanation / Answer
Sales per day = $13,361.65
Discount sales = 0.5($13,361.65)
Discount sales = $6,680.82
A/R attributable to discount customers = $6,680.825(10)
A/R attributable to discount customers = $66,808.25
A/R attributable to nondiscount customers = Total A/R - Discount customers
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