QUESTION 3: CASE STUDY 3 (10%) Cole Property Management Company Cole Property Management Company received a bill...

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Accounting

QUESTION 3: CASE STUDY 3 (10%)
Cole Property Management Company
Cole Property Management Company received a bill for RM103, 500with payment terms 3/20, n/30. Samantha Cole, the owner of thecompany, knows that she will not have enough money in her businesschecking account to pay the bill within 10 days and take the earlypayment discount. In fact, assume that she has nothing in heraccount, not a single penny. Samantha has a good credit, so herbank is willing to lend her all the money to pay the bill in 20days. They charge an interest rate of 8% and they use ordinarysimple interest.
1)Assume that on exactly the day thatthe bill is due (n/30), Samantha will have collected enough moneyfrom the renters and buyers in her apartment units to pay eitherthe invoice or a loan.
2)What should she do, borrow the moneyfrom the bank or pay the invoice on the 30^th day whenshe has money in her account?

Answer & Explanation Solved by verified expert

3.6 Ratings (324 Votes)

This question is solved using the concept of costbenefit analysis If Samantha Cole should borrow the money from the bank then Interest for 10 days is considered as a cost And discount received from early payment is considered as benefits Benefits if borrow the money from the bank See Answer

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QUESTION 3: CASE STUDY 3 (10%)Cole Property Management CompanyCole Property Management Company received a bill for RM103, 500with payment terms 3/20, n/30. Samantha Cole, the owner of thecompany, knows that she will not have enough money in her businesschecking account to pay the bill within 10 days and take the earlypayment discount. In fact, assume that she has nothing in heraccount, not a single penny. Samantha has a good credit, so herbank is willing to lend her all the money to pay the bill in 20days. They charge an interest rate of 8% and they use ordinarysimple interest.1)Assume that on exactly the day thatthe bill is due (n/30), Samantha will have collected enough moneyfrom the renters and buyers in her apartment units to pay eitherthe invoice or a loan.2)What should she do, borrow the moneyfrom the bank or pay the invoice on the 30th day whenshe has money in her account?