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Route Canal Shipping Company has the following schedule for aging of accounts receivable:

d. Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied?

Short Answer

Expert verified

The organization should be satisfied based on the aging schedule.

Step by step solution

01

Meaning of receivables aging

The receivables aging means the time period for which a receivable is not recovered by the organization. The receivables aging is determined by evaluating the period for which the invoice has been outstanding.

02

Explanation of requirement

The organization should be satisfied as they are able to recover 35% of receivables within 30 days, 60% of their receivables within 60 days, and 90% of their receivables within 90 days. The company does not have to wait long to receive all its receivables.

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Most popular questions from this chapter

Postal Express has outlets throughout the world. It also keeps funds for transactions purposes in many foreign countries. Assume in 2010 it held 240,000 reals in Brazil worth 170,000 dollars. It drew 12 percent interest, but the Brazilian real declined 24 percent against the dollar.

a. What is the value of its holdings, based on U.S. dollars, at year-end? (Hint: Multiply $170,000 times 1.12 and then multiply the resulting value by 76 percent.)

Esquire Products Inc. expects the following monthly sales:

January

\(28,000

February

\)19,000

March

\(12,000

April

\)14,000

May

\(8,000

June

\)6,000

July

\(22,000

August

\)26,000

September

\(29,000

October

\)34,000

November

\(42,000

December

\)24,000

Total annual sales

\(264,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for \)2 each and produces them for \(1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

b. Determine a cash receipts schedule for January through December. Assume that dollar sales in the prior December were \)20,000. Work part b using dollars.

What is the prime interest rate? How does the average bank customer fare in regard to the prime interest rate?

In the second year, Fisk Corporation finds that it can reduce ordering costs to \(2 per order but that carrying costs stay the same at \)1.60 per unit. Also, volume remains at 49,000 units per year.

b. How many orders will be placed during the year?

In Problem 18, what long-term interest rate would represent a break-even point between using short-term financing as described in part a and long-term financing? (Hint: Divide the interest payments in 18a by the amount of total funds provided for the six months and multiply by 12.)

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