Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit
ID: 2796427 • Letter: M
Question
Miyagi Data, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 1/10, net 30. Based on experience, 65 percent of all customers will take the discount. (Enter your answer as directed, but do not round intermediate calculations.)
If the company sells 1,400 forecasts every month at a price of $2,600 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 1/10, net 30. Based on experience, 65 percent of all customers will take the discount. (Enter your answer as directed, but do not round intermediate calculations.)
Explanation / Answer
(i) The Average collection period = 10 x 65% + 30 X 35% = 17 Days (I.e. the no. of days to receive cash payments in case of cash discount x % of customers availing the offer + No.of days for credit x % of customers availing the credit) (ii) The balance shown in account recievables = 17 days sales for the last month. All other sales will be recovered. Account recievables during the year = 1400 x 2600 x12 = 43680000 Assuming the sales is incurred uniformly during the month, one day sales = 43680000/365= 119671.2 17 days sales 2034411 Amount of account recievables in balance sheet = 2034411 Please provide feedback…. Thanks in advance…… :-)