Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $24,000 and credit terms of 3/10, n/60. The merchandise had cost Mesa $16,000. Santa Fe paid within the discount period. Assume that both buyer and seller use a perpetual inventory system.
Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 8% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Round your final answer to the nearest whole dollar amount. Use 365 days a year.)
Savings from discount taken = ?
Interest expense on funds borrowed:
Amount borrowed = $23280
Number of days of interest = ?
Interest expense = ?
Buyer's net savings = ?