COGS are 80% of Sales. You collect 80% of sales in the month of sale and the rem
ID: 2652881 • Letter: C
Question
COGS are 80% of Sales. You collect 80% of sales in the month of sale and the remaining 20% in the month following the sale. You purchase 60% of your COGS in the month of sale and 40% in the month prior to the sale. You pay for 70% of purchases in the month that it is purchased and the remaining 30% in the month after it is purchased.
12. How much was Cash Used in February?
a.4260 b. 4720 c. 5440 d. 6200
13. How much was Purchases in March?
a.2360 b. 2920 c. 3560 d. 4320
14. What is the Accounts Receivable balance in January?
a.4200 b. 4800 c. 5400 d. 5800
15. What is the Effective cost of trade credit if the terms are 1/15, net 40 assuming that you forego the discount and pay on the 40th day?
a.13.4% b. 15.8% c. 18.6% d. 21.7%
16. Suppose a firm starts using accelerated depreciation instead of straight-line depreciation (so their depreciation expense is higher). What effect would this have on their financial statements?
a. The firm's tax payments would increase.
b. The firm's net income would increase.
c. The firm's Additional Financing Needed would increase.
d. The firm's net cash flow would increase.
Dec Jarn 5600 6000 rc 7600 March April 6000 4000 5800 Feb May 0000 6000 5000 6000 7000 0000 5600 4000 6000y 5200 5800 6800 Sales Cost of Goods Sold Cash Received Purchases Cash Used Cash Generated by operations 000 5600 4800 4000 48005600 4480 5120 84880 832 920 70405280 5808 1792 832 4880 Cash Accounts Receivable Inventory Accounts Payable 700 2480 5200 5104 4760 792 4272 5104 6024 2792 200 2480 184 A272 002800 520050005200 2480 2160 24802800 232 3992 3944 4184 2800 42322160 5006024Explanation / Answer
12. How much was Cash Used in February?
Cash Used in February = Jan Purchase * 30% + Feb Purchase * 70%
Cash Used in February = 5280*30% + 4480*70%
Cash Used in February = $ 4720
b. 4720
13. How much was Purchases in March?
Purchases in March = 60%*COGS of March+ 40%*COGS of APril
Purchases in March = 60%*4000 + 40%*4800
Purchases in March = $ 4320
d. 4320
14. What is the Accounts Receivable balance in January?
Accounts Receivable balance in January = Beginning + Sale - collected
Accounts Receivable balance in January = 6000 + 7000-7600
Accounts Receivable balance in January = 5400
c. 5400
15. What is the Effective cost of trade credit if the terms are 1/15, net 40 assuming that you forego the discount and pay on the 40th day?
Effective cost of trade credit =( 1+ 1/(100-1))^( 365/(40-15)) -1
Effective cost of trade credit = 15.8%
b. 15.8%
16. Suppose a firm starts using accelerated depreciation instead of straight-line depreciation (so their depreciation expense is higher). What effect would this have on their financial statements?
d. The firm's net cash flow would increase
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