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How do i do the following question below ? Usually we are the one offering the discount, but in this case we are one taking the discount. I tried using the same method but couldn’t get the correct answer.
Qn) Arc co has recently purchased goods costing $12 000 from a supplier. The supplier has offered credit terms of 40 days, with a 3% early settlement discount of Arc pays within 15 days. Arc Co finances its working capital with an overdraft that costs 10% per annum. Assume 365 days in one year.
What is the net saving, or net cost, at the normal time of payment of taking a cash discount?
The answer is : Net saving $278
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