Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit
ID: 2751202 • Letter: M
Question
Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2/20, net 60. Based on experience, 75 percent of all customers will take the discount.
If the company sells 1,330 forecasts every month at a price of $2,430 each, what is its average balance sheet amount in accounts receivable? (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)
Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2/20, net 60. Based on experience, 75 percent of all customers will take the discount.
Explanation / Answer
a)
Average collection period = Number of working days/Debt turnover ratio
= 365 days/0.75
= 486.67 days
b)
The credit sales amount which is still due as on date of balance sheet is shown as Accounts receivable.
Credit sales: Total sales*Percentage of credit sales on total sales
Percentage of credit sales on total sales is 75%
Total sales = $3,231,900 (1,330*2,430)
Accounts receivable = $3,231,900*75/100
= $2,423,925