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 60. Based on experience, 60 percent of all customers will take the discount.

If Kyoto Joe sells 1,000 forecasts every month at a price of $1,600 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 60. Based on experience, 60 percent of all customers will take the discount.

Explanation / Answer

Average collection period=(60*10+40*60)/100=30

Average balance sheet amount in accounts receivable=No of forecasts without discount*Amount*(Days in a year/collection period)

=0.40*1000*1600*(365/60)=3893333

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