Question Details

21. Which one of the following time periods is included in the accounts receivable period but not in the cash collection period? 
A. the period of time between the receipt of a check and the availability of those funds
B. time it takes a firm to process incoming receipts
C. period of time a check is in the mail
D. the amount of time that it takes a bank to credit a firm's account for a deposit made
E. period of time it takes an invoice to reach a customer by mail

22. Which one of the following statements is correct if you purchase an item with credit terms of 1/5, net 15? 
A. If you pay within 1 day, you will receive a 5 percent discount.
B. If you pay within 5 days, you will receive a 1 percent discount.
C. If you do not pay within 15 days, you will be charged interest at a 1.5 percent monthly rate.
D. If you pay within 15 days, you will receive a 1/5th percent discount.
E. You must pay the discounted amount within 15 days.

23. You are doing some comparison shopping. Five stores offer the product you want at basically the same price. Which one of the following stores offers the best credit terms if you plan on taking the discount?

   
A. store A
B. store B
C. store C
D. store D
E. store E

24. You are doing some comparison shopping. Five stores offer the product you want at basically the same price. Which one of the following stores offers the best credit terms if you plan to forego the discount?

   
A. store A
B. store B
C. store C
D. store D
E. store E

25. Which one of the following statements is correct? 
A. The credit period begins when the discount period ends.
B. The discount period is the length of time granted to a customer to pay for a purchase.
C. The credit period begins on the invoice date.
D. With terms of 2/10, net 30, the net credit period is 20 days.
E. With EOM dating, all sales are assumed to have occurred on the 15^th of each month.

26. Which two of the following are the key considerations for a seller who is establishing the length of the credit period being offered to a customer?
I. seller's operating cycle
II. customer's operating cycle
III. seller's inventory period
IV. customer's inventory period 
A. I and II
B. II and III
C. III and IV
D. II and IV
E. I and IV

27. Which one of the following factors tends to favor longer credit periods? 
A. high consumer demand
B. lower priced merchandise
C. increased credit risk
D. merchandise with low collateral value
E. increased competition

28. Which one of the following statements is correct in regards to credit periods? 
A. Perishable items tend to have longer credit periods.
B. Items with low markups tend to have longer credit periods.
C. Smaller accounts tend to have longer credit periods.
D. Different customers may be offered different credit periods by the same firm.
E. Newer products tend to have shorter credit periods.

29. A cash discount of 2/5, net 30: 
A. grants customers 30 days to pay after the discount period expires.
B. offers customers a maximum of 30 days credit.
C. grants free credit for a period of 30 days.
D. charges a higher price to a cash customer than to a customer who pays in 2 days.
E. grants customers 2 days to pay if they want the 5 percent discount.

30. Under credit terms of 1/5, net 15, customers should: 
A. always pay on the 15^th day.
B. take the 5 percent discount and pay immediately.
C. take the discount and pay on the day following the day of sale.
D. either take the discount or pay on the 15^th day.
E. both take the discount and pay on the 15^th day.

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29. A cash discount of 2/5, net 30: 
A. grants customers 30 days to pay after the discount period expires.
B. offers customers a maximum of 30 days credit.
C. grants free credit for a period of 30 days.
D. charges a higher price to a cash customer than to a customer who pays in 2 days.
E. grants customers 2 days to pay if they want the 5 percent discount.

30. Under credit terms of 1/5, net 15, customers should: 
A. always pay on the 15^th day.
B. take the 5 percent discount and pay immediately.
C. take the discount and pay on the day following the day of sale.
D. either take the discount or pay on the 15^th day.
E. both take the discount and pay on the 15^th day.