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Route Canal Shipping Company

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Question

15)Route Canal Shipping Company has the following schedule for aging of accounts receivable:  Age of Receivables
April 30, 2013(1)(2)(3)(4)Month of
SalesAge of
AccountAmountsPercent of
Amount Due  April0–30$176,890  _______  March31–60 126,350  _______  February61–90 151,620  _______  January91–120 50,540  _______         Total receivables $505,400  100%      a.Calculate the percentage of amount due for each month.  Month of SalesPercent of Amount Due  April  %   March  %   February  %   January  %         Total receivables 100 %        b.If the firm had $1,596,000 in credit sales over the four-month period, compute the average collection period. Average daily sales should be based on a 120-day period.    Average collection period days    c.If the firm likes to see its bills collected in 43 days, should it be satisfied with the average collection period?  YesNo  d.Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied?  YesNo

 
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Neveready Flashlights Inc.

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Question

13)Neveready Flashlights Inc. needs $346,000 to take a cash discount of 2/12, net 74. A banker will loan

the money for 62 days at an interest cost of $10,500.

a.What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest%  
b. How much would it cost (in percentage terms) if the firm did not take the cash discount but paid the bill in 74 days instead of 12 days? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  Cost of not taking a cash discount%  
c. Should the firm borrow the money to take the discount?
  
 NoYes
d. If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $346,000?
  Amount to be borrowed$  
e-1.What would be the effective interest rate in part d if the interest charge for 62 days were $12,300? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  Effective rate of interest%  
e-2.Should the firm borrow with the 20 percent compensating balance requirement? (The firm has no funds to count against the compensating balance requirement.)
  
 YesNo
 
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Mr. Hugh Warner is a very cautious businessman

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11)Mr. Hugh Warner is a very cautious businessman. His supplier offers trade credit terms of 2/20, net 125.

Mr. Warner never takes the discount offered, but he pays his suppliers in 115 days rather than the 125 days allowed so he is sure the payments are never late.

What is Mr. Warner’s cost of not taking the cash discount? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  Cost of not taking a cash discount %  
 
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interest

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Question

10)If you borrow $7,200 at $750 interest for one year, what is your effective interest rate for the

following payment plans? (Input your answers as a percent rounded to 2 decimal places.)

    Effective Rate of Interest
  a. Annual payment%  
  b. Semiannual payments%  
  c.Quarterly payments%  
  d. Monthly payments %  
 
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