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Chapter 3: 11BP_a (page 221)

Route Canal Shipping Company has the following schedule for aging of accounts receivable:

a. Fill in column (4) for each month.

Age of receivables April 30 20X1

1

2

3

4

Month of sales

Age of accounts

Amounts

Percent of amount due

April

0-30

\(131,250

____

March

31-60

\)93,750

____

February

61-90

\(112,500

____

January

91-120

\)37,500

____

Total receivables

$375,000

100%

Short Answer

Expert verified

The percentages of amount dues are 35% in April, 25% in March, 30% in February, and 10% in January.

Step by step solution

01

Formula for calculating the percent of amount dues

Percentofamountdue=AccountsreceivableinamonthTotalaccountsreceivable×100

02

Explanation for requirement

Month of sales

Age of accounts

Amounts

Percent of amount due

April

0-30

$131,250

35%

March

31-60

$93,750

25%

February

61-90

$112,500

30%

January

91-120

$37,500

10%

Total receivables

$375,000

100%

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Most popular questions from this chapter

City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers so the firm’s checks will take longer to clear the bank. Collection time has been reduced by two days and disbursement time increased by one day because of these policies. Excess funds are being invested in short-term instruments yielding 12 percent per annum.

a. If City Farm has \(5 million per day in collections and \)3 million per day in disbursements, how many dollars has the cash management system freed up?

Bombs Away Video Games Corporation has forecasted the following monthly sales:

January

\(100,000

February

\)93,000

March

\(25,000

April

\)25,000

May

\(20,000

June

\)35,000

July

\(45,000

August

\)45,000

September

\(55,000

October

\)85,000

November

\(105,000

December

\)123,000

Total annual sales

\(756,000

Bombs Away Video Games sells the popular Strafe and Capture video game. It sells for \)5 per unit and costs \(2 per unit to produce. A level production policy is followed. Each month’s production is equal to annual sales (in units) divided by 12.

Of each month’s sales, 30 percent are for cash and 70 percent are on account. All accounts receivable are collected in the month after the sale is made.

c. Determine a cash payments schedule for January through December. The production costs of \)2 per unit are paid for in the month in which they occur. Other cash payments, besides those for production costs, are $45,000 per month.

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of \(8 per order, and carrying costs of \)1.60 per unit.

d. What is the total cost of ordering and carrying inventory?

Antivirus Inc. expects its sales next year to be \(2,500,000. Inventory and accounts receivable will increase \)480,000 to accommodate this sales level. The company has a steady profit margin of 15 percent with a 35 percent dividend payout. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing

In the second year, Fisk Corporation finds that it can reduce ordering costs to \(2 per order but that carrying costs stay the same at \)1.60 per unit. Also, volume remains at 49,000 units per year.

c. What will the average inventory be?
See all solutions

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