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AICPA Exam CPA-Business Topic 3 Question 94 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 94
Topic #: 3
[All CPA-Business Questions]

CyberAge outlet, a relatively new store, is a cafe that offers customers the opportunity to browse the Internet or play computer games at their tables while they drink coffee. The customer pays a fee based on the amount of time spent signed on to the computer. The store also sells books, tee shirts, and computer accessories. CyberAge has been paying all of its bills on the last day of the payment period, thus forfeiting all supplier discounts. Shown below are data on CyberAge's two major vendors, including average monthly purchases and credit terms.

Should CyberAge use trade credit and continue paying at the end of the credit period?

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Suggested Answer: D

Choice 'd' is correct. Yes, CyberAge should use trade credit and continue paying at the end of the credit period, if the cost of alternative short-term financing is more.

Choices 'a', 'b', and 'c' are incorrect, per the above Explanation:.


by Ammie at Aug 04, 2024, 07:46 PM

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Estrella
11 months ago
That makes sense. It's important for businesses to consider the cost of financing options before making a decision.
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Keva
11 months ago
Option D makes the most sense to me. If the alternative short-term financing is more expensive, then trade credit is the way to go. Simple as that.
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Yong
10 months ago
Definitely, if it's more expensive to use alternative short-term financing, then sticking with trade credit is the better option. Option D all the way.
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Tomas
10 months ago
I think so too. It's all about saving money in the end. Option D is the way to go.
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France
10 months ago
I agree, option D seems like the best choice. If it's cheaper to use trade credit, why not take advantage of that?
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Shantell
11 months ago
Because if the cost of alternative short-term financing is more, it would be beneficial for CyberAge to take advantage of the trade credit terms.
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Estrella
11 months ago
Why do you think so?
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Shantell
12 months ago
I think CyberAge should use trade credit and continue paying at the end of the credit period.
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Starr
12 months ago
Trade credit? Nah, I say we just barter with the vendors. Coffee for computer accessories, you know? That'll save us some cash.
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Glory
10 months ago
C) No, if the cost of alternative long-term financing is more.
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Twila
11 months ago
Trade credit? Nah, I say we just barter with the vendors. Coffee for computer accessories, you know? That'll save us some cash.
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Daron
11 months ago
B) Yes, if the firm's weighted average cost of capital is equal to its weighted average trade credit.
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Colton
11 months ago
A) No, if the cost of alternative short-term financing is more.
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