In: Accounting
Factor Financing
A. Year end receivable balance = $150,000
Discount = 6% upto 40 days
Hence, amount received = 150000*94% = 141,000
B. Year end receivable balance = $150,000
Collection period = 70 days
For each 15 day increase over 40 days, an additional 2% is charged. Thus, 4% extra discount will be charged for 30 days.
Hence, total discount = 6% + 4% = 10%
Hence, amount received = 150000*90% = $135,000
C. Year end receivable balance = $150,000
Collection period = 70 days
Normal discount rate upto 40 days = 8%
Additonal discount = 1.5% for every 10 days.
Hence, additonal discount = 4.5%
Total discount = 4.5%+8% = 12.5%
Hence amount received = 150000*87.5% = $131,250
D. Average collection period = 365/ Accounts receivable turnover ratio
Accounts receivable turnover ratio = Net credit sales/Average receivables = 610,000/150,000 = 4.067
Average collection period = 365/4.067 = 89.74 days or 90 days (rounded off)
E.
Year end receivable balance = $150,000
Collection period = 90 days
Normal discount rate upto 40 days = 6%
Additonal discount = 2% for every 15 days.
Hence, additonal discount = 8% [For extra 50 days]
Total discount = 8%+8% = 16%
Hence amount received = 150000*84% = $126,000
If you found the above answer useful, please take a moment to up-vote the same. It will help me serve you better in future!