instructions i help Question 9 (of 10) E save & Exit, submit . 10.00 points Miya
ID: 2794129 • Letter: I
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instructions i help Question 9 (of 10) E save & Exit, submit . 10.00 points Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 3/10, net 50. Based on experience, 75 percent of all customers will take the discount. a. What is the average collection period? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g, 32) Average collection period 20 days millions of dollars, e.9 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g Average accounts receivable what is its average balance sheet amount in accounts receivable? (Enter your answer in dollars, not .16.) References eBook &Resources; Learning Objective: 17-02 Analyze how firms manage their receivables and the basic components of a firms credit Worksheet 7 888 FA F6 8 3 4 IAlExplanation / Answer
Soln : Credit terms of 3/10 , net 50 means here that , person taking credit , will get 3% discount of the invoice value if paid in 10 days where the 50 days is the actual days of repayment from the date of invoice.
For Example, if customer is taking credi of $1000 for net 50 i.e. 50 days to pay, but paid the amount in 10 days, he can pay 3% of 1000 i.e. $970.
a) As, it is given that 75% of the customer are taking discount, means paying in 10 days and rest 25% in 50 days.
So, average collection period = 75%*10 + 25%* 50 = 20 days.
b) Now, company is able to sell total no. forecast = 1280 and with value $2380
So, average balance sheet amounts in accounts receivable = average collection period* total collection/total no. of days
= 20*1280*2380/30 = $2030933
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