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 3.0/15, net 60. Based on experience, 40 percent of all customers will take the discount.

If Kyoto Joe sells 1,060 forecasts every month at a price of $1,900 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))

Explanation / Answer

Hi,

Please find the answer as follows;

Part A:

Average Collection Period = 40%*15 + 60%*60 = 42 days

Part B:

Average Balance = 1060*1900*42*12/365 = 2780975.34

Thanks.

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