Question
Use the following data to answer questions below.
|
Month
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
Jun
|
July
|
Aug
|
|
Sales ($ K)
|
53
|
40
|
70
|
60
|
55
|
85
|
42
|
35
|
a. What will be the firm's collections in May, if the firm gives it customers the following number of days to pay:
|
Number of days of credit
|
Collections ($ K)
|
|
0
|
|
|
30
|
|
|
60
|
|
|
90
|
|
|
15
|
|
|
45
|
|
|
75
|
|
|
40
|
|
|
55
|
|
b. Firm gives its customers 2 months credit. In March, the firm received a cash advance of $20K from one of its customers. Sales to this customer (which are included in the sales figures below) are $12K, $6K, and $2K in April, May, and June. Fill in the following table with expected A/R and Collections ($ '000) for March, April, May, June, July, and August:
|
Month
|
March
|
April
|
May
|
June
|
July
|
Aug
|
|
Sales
|
|
|
|
|
|
|
|
A/R @ month end
|
|
|
|
|
|
|
|
Collections
|
|
|
|
|
|
|
c. Firm currently gives its customers 90 days credit. It has notified its customers that it plans to reduce its credit period. It expects to make the transition after April (end of April A/R = 90 days of sales). By the end of May, it hopes to cut its A/R to 60 days of sales, and further cut it to 30 days of sales by the end of June. Fill in the following table:
|
Month
|
April
|
May
|
June
|
July
|
Aug
|
|
Collections
|
|
|
|
|
|