Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit te

Question

Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2.0/10, net 90. Based on experience, 40 percent of all customers will take the discount.

If Kyoto Joe sells 750 forecasts every month at a price of $1,625 each, what is its average balance sheet amount in accounts receivable? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2.0/10, net 90. Based on experience, 40 percent of all customers will take the discount.

Explanation / Answer

2.0/10, net 90. means the person taking the discount of 2% will be paying within 10days and rest will pay in 90 days.

a. Average collection period = .40(10 days) + .60(90 days) = 4 +54 = 58 days

b. Average balance = 750($1,625)(58)(12/365) =$2,323,972.60

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.