Skilantic Company needs to pay a supplier’s invoice of $60,000 and wants to take a cash discount of 2/10, net 40. The firm can borrow the money for 30... Accounting MCQs | Accounting MCQs

Skilantic Company needs to pay a supplier’s invoice of $60,000 and wants to take a cash discount of 2/10, net 40. The firm can borrow the money for 30 days at 11% per annum plus a 9% compensating balance.
The amount Skilantic must borrow to pay the supplier within the discount period and cover the compensating balance is

$60,000
$65,934
$64,615
$58,800Show Result

Correct - Your answer is correct.

Wrong - Your answer is wrong.

Detailed Answer

Answer (C) is correct. Skilantic’s total borrowings on this loan can be calculated as follows: Total borrowings = Amount needed ÷ (1.0 – Compensating balance %) = ($60,000 × 98%) ÷ (100% – 9 = $58,800 ÷ 91% = $64,615