Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit
ID: 2769025 • Letter: M
Question
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. (Enter your answer as directed, but do not round intermediate calculations.)
If the company sells 1,280 forecasts every month at a price of $2,380 each, what is its average balance sheet amount in accounts receivable? (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 3/10, net 50. Based on experience, 75 percent of all customers will take the discount. (Enter your answer as directed, but do not round intermediate calculations.)
Explanation / Answer
Answer:(a) The average collection period is the percentage of accounts taking the discount times the discount period, plus the percentage of accounts not taking the discount times the days' until full payment is required, so:
Average collection period = 0.75(10 days) + 0.25(50 days)
Average collection period = 20 days
Answer:(b) And the average daily balance is:
Average balance = 1,280($2,380)(12)(30/365)
Average balance = $3004668.49