FIN3702 ASSIGNMENT 2 2021
ASSIGNMENT 02 (compulsory)
20 MULTIPLE-CHOICE QUESTIONS (20 marks)
DUE DATE: 30/07/2021
UNIQUE NUMBER: 805255
, Call/Whatsapp 066 077 8000 for assistance and enquiries
QUESTION 1
Taffy Bags was extended credit terms of 2/10 net 60. The approximate cost of giving
up the cash discount, assuming a 365-day year is …
1. 6.10%.
2. 7.20%.
3. 12.20%.
4. 14.90%.
Workings
365 365
Cash discount x = 2 x (60−10) = 14.6%
N
QUESTION 2
Dash Ltd had actual sales in November of R100 000 and projected sales in
December and January of R300 000 and R400 000 respectively. 10% of sales are
collected during the month of sale, 40% are collected in the month following the
month of sale and the balance is collected two months following the sale. The firm’s
total expected receipts in January are …
1. R 70 000.
2. R108 000.
3. R210 000.
4. R610 000.
Workings
Total receipts in January = (0.10 x 400 000) + (0.50 x 100 000) + (0.40 x 300 000)
Total receipts = 210 000
The information below applies to the next three questions.
Crystals’. currently makes all sales on credit and offers no cash discount. The firm is
considering a 3% cash discount for payment within 10 days. The firm's current
average collection period is 90 days, sales are 400 art pieces per year, selling price
is R25 000 per art piece, variable cost per item is R18 750, and the average cost per
item is R21 000. The firm expects that the change in credit terms will result in a
minor increase in sales of 10 items per year that 75% of the sales will take the
discount, and the average collection period will drop to 30 days. The firm's bad debt
expense is expected to become negligible under the proposed plan. The bad debt
expense is currently 0.5% of sales. The firm's required return on equal-risk
investments is 20%. (Assume a 360-day year).
ASSIGNMENT 02 (compulsory)
20 MULTIPLE-CHOICE QUESTIONS (20 marks)
DUE DATE: 30/07/2021
UNIQUE NUMBER: 805255
, Call/Whatsapp 066 077 8000 for assistance and enquiries
QUESTION 1
Taffy Bags was extended credit terms of 2/10 net 60. The approximate cost of giving
up the cash discount, assuming a 365-day year is …
1. 6.10%.
2. 7.20%.
3. 12.20%.
4. 14.90%.
Workings
365 365
Cash discount x = 2 x (60−10) = 14.6%
N
QUESTION 2
Dash Ltd had actual sales in November of R100 000 and projected sales in
December and January of R300 000 and R400 000 respectively. 10% of sales are
collected during the month of sale, 40% are collected in the month following the
month of sale and the balance is collected two months following the sale. The firm’s
total expected receipts in January are …
1. R 70 000.
2. R108 000.
3. R210 000.
4. R610 000.
Workings
Total receipts in January = (0.10 x 400 000) + (0.50 x 100 000) + (0.40 x 300 000)
Total receipts = 210 000
The information below applies to the next three questions.
Crystals’. currently makes all sales on credit and offers no cash discount. The firm is
considering a 3% cash discount for payment within 10 days. The firm's current
average collection period is 90 days, sales are 400 art pieces per year, selling price
is R25 000 per art piece, variable cost per item is R18 750, and the average cost per
item is R21 000. The firm expects that the change in credit terms will result in a
minor increase in sales of 10 items per year that 75% of the sales will take the
discount, and the average collection period will drop to 30 days. The firm's bad debt
expense is expected to become negligible under the proposed plan. The bad debt
expense is currently 0.5% of sales. The firm's required return on equal-risk
investments is 20%. (Assume a 360-day year).
