Chapter 20 Credit and Inventory Management

C* = $15,000 + [.75($55)($5,4002/.00046)]1/3
C* = $28,776.89

Average cash balance = [4($28,776.89) − $15,000]/3
Average cash balance= $33,369
107) D
C* = $12,000 + [.75($49)($3,8002/.00047)]1/3
C* = $22,413
108) C
C* = $27,000 + [.75($48)($11,4002/.00041)]1/3
C* = $49,513.49

U* = 3($49,513.49) − 2($27,000)
U* = $94,540

Student name:
1) McCallister's just purchased $15,100 worth of inventory. The terms of the sale were 2/15,
net 40. What is the implicit interest?
1)


A) $321
B) $302
C) $272
D) $340
E) $282

,Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand
Topic : Costs of credit
Section : 20.1 Credit and Receivables
Learning Objective : 20-01 Explain how firms manage their receivables and the basic components of a f




2) Your firm is offered credit terms of 2/15, net 25. What is the effective annual interest rate
on this arrangement? Assume 365 days per year.
2)


A) 46.23%
B) 68.10%
C) 48.67%
D) 43.80%
E) 109.05%



Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand
Topic : Costs of credit
Section : 20.1 Credit and Receivables
Learning Objective : 20-01 Explain how firms manage their receivables and the basic components of a f




3) Cosplay Unlimited sells 1,120 outfits per year at an average price of $144. The terms of
the sale are 2/10, net 35. The discount is taken by 72 percent of customers. What is the
company's accounts receivable balance? Assume 365 days per year.
3)

, A) $9,487.06
B) $15,465.21
C) $17,011.73
D) $7,511.67
E) $8,499.37



Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand
Section : 20.1 Credit and Receivables
Topic : Credit terms
Learning Objective : 20-01 Explain how firms manage their receivables and the basic components of a f




4) Cat Supplies offers terms of 2/15, net 40. The discount is taken by 78 percent of
customers. What is the company's average collection period?
4)


A) 19.27 days
B) 24.00 days
C) 27.50 days
D) 17.80 days
E) 20.50 days



Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand
Section : 20.1 Credit and Receivables
Topic : Credit terms
Learning Objective : 20-01 Explain how firms manage their receivables and the basic components of a f

, 5) Black Guard Security has annual sales of $351,000 and a collection period of 19.75 days.
What is the company's average balance in accounts receivable? Assume 365 days per year.
5)


A) $17,264.38
B) $18,382.31
C) $19,625.55
D) $17,772.15
E) $18,992.47



Question Details
Difficulty : 1 Basic
AACSB : Analytical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Bloom's : Understand
Section : 20.1 Credit and Receivables
Topic : Accounts receivable
Learning Objective : 20-01 Explain how firms manage their receivables and the basic components of a f




6) Silver Eyes, Incorporated, has an average collection period of 24.17 days and its average
daily accounts receivable is $393,000. What are the company's annual credit sales assuming 365
days per year?
6)


A) $9,498,810.00
B) $6,923,976.00
C) $8,211,393.00
D) $6,594,262.86
E) $5,934,836.57