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Chapter 3: 2DQ (page 157)

Explain the similarities and differences of lockbox systems and regional collection offices

Short Answer

Expert verified

The lockbox system and regional collection offices are used to clear the checks, but both use different models for the check clearing process.

Step by step solution

01

The similarities in lockbox system and regional collection office

The lockbox system and the regional collections offices quickly process the checks originating at distant places.

02

The differences in lockbox system and regional collection office

The lockbox system requires the entity to use a post office box to send the check and the help of a local bank to clear the check. The regional collection office uses an office and staff for receiving and clearing the checks.

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Most popular questions from this chapter

Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide \(180,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will also incur \)16,200 in additional collection expense. Production and marketing costs represent 72 percent of sales. The firm is in a 34 percent tax bracket and has a receivables turnover of four times. No other asset build-up will be required to service the new customers. The firm has a 10 percent desired return.

b. Calculate the incremental income after taxes and the return on incremental investment if 15 percent of the new sales prove to be uncollectible. Should credit be extended if 15 percent of the new sales prove uncollectible?

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.

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

Orbital Communications has operating plants in over 100 countries. It also keeps funds for transactions purposes in many foreign countries. Assume in 2010 it held 150,000 kronas in Norway worth \(40,000. The funds drew 13 percent interest, and the krona increased 6 percent against the dollar. What is the value of the holdings, based on U.S. dollars, at year-end?

(Hint: Multiply \)40,000 times 1.13 and then multiply the resulting value by 106 percent.)

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