12. How much was Cash Used in February? a.4260 b. 4720 c. 5440 d. 6200 13. How m
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Question
12. How much was Cash Used in February?
a.4260 b. 4720 c. 5440 d. 6200
13. How much was Cash Received in April?
a.4800 b. 5200 c. 5800 d. 6200
14. What is the Accounts Receivable balance in January?
a.5400 b. 5800 c. 6200 d. 6600
15. What is the Nominal cost of trade credit if the terms are 2/15, net 50 assuming that you forego the discount and pay on the 50th day?
a.13.4% b. 15.8% c. 18.6% d. 21.3%
8. Suppose that Sales for the entire year were $200,000 and Cost of Goods Sold 60% of Sales. The Inventory Balance is $10,000, the Accounts Payable Balance is $5,000, and the Cash Conversion Cycle is 40 days. What is the Inventory Conversion Period?
a.18 b. 24 c. 30 d. 36
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
14. Calculation of Account Receivable Balance in January:
Receivable of December = $6,000
Add: Sales of January = $7,000
Total = 13,000
Less: Cash Received in January = $7,600
Balance = $5,400
So, Balance of Account Receivable in January = $5,400
12. Cash Used in February:
Cash received in February = Opening Balance of Receivable + Sales - Closing Balance of Receivable
Cash received in February = 5,400 + 6,000 - 5,200 = $6,200
Cash used in February = Opening Balance of Cash + Cash received in February - Closing Balance of Cash
Cash used in February = 2,792 + 6,200 - 4,272= $4,720
So, Cash used in February = $4,720
13. Cash received in April: Closing Balance of Cash + Cash used in April - Opening balance of Cash
Cash received in April = 6,024 + 4,880 - 5,104 = $5,800
So, cash received in April = $5,800
8. Calculation of Inventory Conversion period:
Inventory Conversion Period = Inventory / Average cost of Goods sold per Day
Average Cost of Goods sold per Day = Cost of Goods Sold / 365
Cost of Goods Sold = Sales x Cost of Goods sold %
Cost of Goods Sold = 200,000 x 60% = $120,000
Average Cost of Goods sold per Day = 120,000 / 365 = $328.767
Inventory Conversion Period = 10,000 / 328.767 = 30 Days
15. Calculation of Cost of Credit:
Suppose we have to pay 10,000
If pay within 15 Days we get a discount of 2% and have to pay only 9,800.
But we paid in 50 Days. So, for using 9,800 for 35 days we have to bear a Cost of 200.
Annual Cost = 200 / 9800 x 10.43 = 21.30%
(365 / 35 = 10.43)
So, the correct Option is 21.3%
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