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 2.0/15, net 60. Based on experience, 80 percent of all customers will take the discount.

If Kyoto Joe sells 790 forecasts every month at a price of $1,825 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 2.0/15, net 60. Based on experience, 80 percent of all customers will take the discount.

Explanation / Answer

a. Average collection period = 80% * 15 + 20% * 60 = 24 days

b. Yearly sales = 790 * 1825 * 12 = 17,301,000

Average accounts receivable balance = 24/365 * 17,301,000 = $ 1,137,600.00

Hope this helped ! Let me know in case of any queries.

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