The cost of a credit sale is the difference between the cash price and the amount that will be collected, or \$5275 – \$500 = \$975.

The cost of a credit sale is the difference between the cash price and the amount that will be collected, or \$500 – \$300 = \$200.

#### A credit sale of \$400 to customer would result in which of following?

A one-time receivable for this transaction equals \$975 (the difference between what we charged them (\$5700) and how much they have paid us so far (\$2500)).

Plus an unearned portion equal to: The interest on our money during those months until it’s received + The original principal balance minus any payments made by customers over time.

So, if there was no discount in exchange for taking extended payment terms, then the gross profit would be only 20% instead of 40%.

The cost of a credit sale is the difference between the cash price and the amount that will be collected, or \$500 – \$300 = \$200.

This means we have to charge customers an additional 20% in order for them to pay it off over 12 months.

#### If they only had six months until their due date, then we would need an extra 40%.

With this type of financing, you want to make sure your customer can afford what they’re buying before you sell it!

A one-time receivable for this transaction equals \$975 (the difference between what we charged them (\$5700) and how much they have paid us so far (\$2500)).