2. With average account receivable of $5 million and average credit sales of $24 million; you company factors recei...

Question

Question

2. With average account receivable of $5 million and average credit sales of $24 million; you company factors receivables by

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Effective rate of interest= (1+period rate ) ^n -1

For discount 2% EAR calculation based on periodic rate

Period rate= discount 2% divided by balance percentage (98%)

Period rate = 2%/98%

Period rate = 2% /98%= 2.0408%

N= receivable turnover= net Credit sale/ average Account receivable

Receivable turnover= 24/5=4.8

Effective rate of interest= (1+0.020408)^4.8 -1=10.183% or 10.18%

Add a comment

Answer 2

Similar Homework Help Questions

Assume your average credit sales are $50 million per year and average accounts receivable are $5...

Assume your average credit sales are $50 million per year and average accounts receivable are $5 million. A factoring company offers you an agreement that it will be buying your accounts receivable at a 2.70% discount. Your bank offers you a credit at R% per year (actual yearly rate). What would be the minimum R% for which you would choose factoring? That is, what is the rate R% offered by the bank at or below which you would rather borrow...
The average credit sales for Jiffy Co. is $375,000. Accounts receivables average balance is $68,000. Jiffy...

The average credit sales for Jiffy Co. is $375,000. Accounts receivables average balance is $68,000. Jiffy factors its receivables by discounting them 3%. What is the effective cost of factoring? Bob’s Hobby has annual average purchases of $138,000 and an ending accounts payable balance of $21,748. How long, on average, does it take Bob’s to pay for its purchases? Marcos Inc. wants to maintain a minimum cash balance of $20 million, which is what the company currently has on hand....
In order to faster convert Account Receivable into cash, a company can sell its accounts receivable...

In order to faster convert Account Receivable into cash, a company can sell its accounts receivable to another company, called a factor, at a discount. Assume your average credit sales are $50 million per year and average accounts receivable are $5 million. A factoring company offers you an agreement that it will be buying your accounts receivable at a 2.20% discount. Your bank offers you a credit at R% per year (actual yearly rate). What would be the minimum R%...

A company reports the following information for the year: Net credit sales Average accounts receivable Cash...

A company reports the following information for the year: Net credit sales Average accounts receivable Cash collections on credit sales $120,000 15,000 105,000 What is the company's receivables turnover ratio? (Round your answer to 1 decimal place.
Faeber Textile Company frequently factors its accounts receivable. During 2019, Faeber made credit sales of $100,000...

Faeber Textile Company frequently factors its accounts receivable. During 2019, Faeber made credit sales of $100,000 to customers, under terms of 2/10, n/30. Faeber records its credit sales using gross price. In 2019, Faeber sold $70,000 of these receivables to a factor. The factor remitted 90% of the accounts receivable factored and charged a 12% commission on the gross amount of the factored receivables. The factoring agreement also requires Faeber to be responsible for any cash discounts taken by customers...
The Malibu Corporation has annual credit sales of $34 million. The average collection period is 36...

The Malibu Corporation has annual credit sales of $34 million. The average collection period is 36 days. What is the average investment in accounts receivable as shown on the balance sheet? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Average receivables.

The Malibu Corporation has annual credit sales of $36 million. The average collection period is 38...

The Malibu Corporation has annual credit sales of $36 million. The average collection period is 38 days. What is the average investment in accounts receivable as shown on the balance sheet? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Average receivables.
I need help solving 6 and 7 Receivable for $25,000 and Sales 5. AG Inc. made...

I need help solving 6 and 7 Receivable for $25,000 and Sales 5. AG Inc. made a $25,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? CA Debit Accounts Receivable for $24,500. B) Debit Accounts Receivable for $24,500 and Sales Discounts for $500. 1 Debit Accounts Receivable for $25,000. ar net aAS C) D)...
Net credit sales $120,000 Average accounts receivable 20,000 Cash collections on credit sales 100,000 271) What...

Net credit sales $120,000 Average accounts receivable 20,000 Cash collections on credit sales 100,000 271) What is the receivables turnover ratio? A) 5.0. B) 1.2. C) 0.2. D) 6.0. If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be Neither disclosed nor reported as a liability. Disclosed and reported as a liability. Reported as a liability, but not disclosed....

Calistoga Produce estimates bad debt expense at 0.40% of credit sales. The company reported accounts receivable...

Calistoga Produce estimates bad debt expense at 0.40% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $487,000 and $1,540, respectively, at December 31, 2020. During 2021, Calistoga's credit sales and collections were $319,000 and $312,000, respectively, and $1,770 in accounts receivable were written off. Calistoga's accounts receivable at December 31, 2021, are: Multiple Choice $478,230. $494,000. $485,230. $492,230. Accounts receivable are normally reported at the: Multiple Choice Expected amount to be collected. Current value...

2. With average account receivable of $5 million and average credit sales of $24 million; you company factors recei...

Homework Answers

Add Answer to:
2. With average account receivable of $5 million and average credit sales of $24 million; you company factors recei...

Post as a guest

Earn Coins

Assume your average credit sales are $50 million per year and average accounts receivable are $5...

The average credit sales for Jiffy Co. is $375,000. Accounts receivables average balance is $68,000. Jiffy...

In order to faster convert Account Receivable into cash, a company can sell its accounts receivable...

A company reports the following information for the year: Net credit sales Average accounts receivable Cash...

Faeber Textile Company frequently factors its accounts receivable. During 2019, Faeber made credit sales of $100,000...

The Malibu Corporation has annual credit sales of $34 million. The average collection period is 36...

The Malibu Corporation has annual credit sales of $36 million. The average collection period is 38...

I need help solving 6 and 7 Receivable for $25,000 and Sales 5. AG Inc. made...

Net credit sales $120,000 Average accounts receivable 20,000 Cash collections on credit sales 100,000 271) What...

Calistoga Produce estimates bad debt expense at 0.40% of credit sales. The company reported accounts receivable...

2. With average account receivable of $5 million and average credit sales of $24 million; you company factors recei...

Homework Answers

Add Answer to: 2. With average account receivable of $5 million and average credit sales of $24 million; you company factors recei...

Post as a guest

Earn Coins

Add Answer to:
2. With average account receivable of $5 million and average credit sales of $24 million; you company factors recei...