Instruction 22.1:
Use the information to answer following question(s).
SureDrip Irrigation Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to SureDrip is available at an annual rate of 9.6%. SureDrip has just purchased $400,000 of plastic chips from Sun Chemical.
-Refer to Instruction 22.1. What is the amount of money SureDrip will save on accounts payable if they accept the discount?
A) $400,000
B) $8,000
C) $33,333
D) $20,000

Question

Quizplus · Accepted Answer

If SureDrip accepts the discount, they will pay 98% of the purchase price, which is $392,000 ($400,000 x 0.98). If they do not accept the discount and pay the full balance in 45 days, they will pay $400,000. Therefore, they will save $8,000 ($400,000 - $392,000) by accepting the discount.

Instruction 22.1: Use the Information to Answer Following Question(s)