Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit te
ID: 2701650 • Letter: K
Question
Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2.0/15, net 30. Based on experience, 60 percent of all customers will take the discount.
a. what is the average collection period (days)? use 365 days a year
b. If Kyoto Joe sells 1,040 forecasts every month at a price of $1,800 each, what is its average balance sheet amount in accounts receivable? Average balance($)? use 365 days a year. do not round intermediate calculations and round your final answer 2 decimal places.
Please show all of the work and label clearly the answers a. and b. thank you!
Explanation / Answer
a. Average collection period (days)? round answer to 2 decimal places.
Avg Collecton Period = 15days * 60% + 30 days * 40% = 21 Days
b. If Kyoto Joe sells 1,040 forecasts every month at a price of $1,800 each, what is its average balance sheet amount in accounts receivable? Average balance($)? use 365 days a year. do not round intermediate calculations and round your final answer 2 decimal places.
Average receivables = Sales/365 * Avg Collecton Period = (1040*1800*12)/365 * 21 = $ 1,292,449.32
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