ADMS 3585 Study Guide - Chester A. Arthur, Accounts Receivable, Financial Statement
30 Sep 2014
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Sales recorded at net: june 3 accounts receivable. 75 (note to instructor: sales discounts forfeited could have been recognized at the time the discount period lapsed. The company, however, would probably not record this forfeiture until final cash settlement. ) (b) Implied interest rate on accounts receivable not paid to arnold within the discount period = 3% / (50/365) = 21. 9%. (note that. If chester arthur has a line of credit facility with its bank at an interest rate of 10%, Chester arthur is recommended to pay amounts owing to arnold within the discount period, using funds borrowed against its line of credit facility. Chester arthur would be using funds charged interest at a rate of 10%, to earn 21. 9% interest on early payment of amounts owing to arnold. 380 (note: it is possible that the company already recorded the sales. In this case, the credit to the accounts. The same point applies to the next entry as well. )
