a)
To determine: The cash collection for each four quarters when the collection period is 45 days.
Introduction:
Cash collection is the amount collected through business. It is a task of accounts receivables.
Average cash collection period is the number of days taken to collect the cash from the customers.
a)
Answer to Problem 5QP
The cash collection for quarter 1 is $670, quarter 2 is $735, quarter 3 is $790, and quarter 4 is $870.
Explanation of Solution
Given information:
Accounts receivable at the beginning of the year is $310, Collection period is 45 days.
Compute cash collection for each four quarters:
Note: All the receivables, which are outstanding, will be collected in the current year
Compute ending receivables for quarter 1:
Therefore, the ending receivable will be half of the current year sales
Hence, ending receivables is $360.
Compute cash collection for quarter 1:
Hence, cash collected for the quarter 1 is $670.
Compute ending receivables for quarter 2:
Hence, ending receivables is $375.
Compute cash collection for quarter 2:
Hence, the cash collected for the quarter 2 is $735.
Compute ending receivables for quarter 3:
Hence, the ending receivables is $415.
Compute cash collection for quarter 3:
Hence, the cash collected for the quarter 3 is $790.
Compute ending receivables for quarter 4:
Hence, the ending receivables is $455.
Compute cash collection for quarter 4:
Hence, the cash collected for the quarter 4 is $870.
b)
To determine: The cash collection for each four quarters when the collection period is 60 days.
Introduction:
Cash collection is the amount collected through business. It is a task of accounts receivables.
Average cash collection period is the number of days taken to collect the cash from the customers.
b)
Answer to Problem 5QP
The cash collection for quarter1 is $790, quarter 2 is $740, quarter 3 is $803.24, and quarter 4 is $883.43.
Explanation of Solution
Given information:
Accounts receivables at the beginning of the year are $310, Collection period is 60 days.
Compute cash collection for each four quarters:
Note: All the receivables, which are outstanding, will be collected by this current year
Compute ending receivables for quarter 1:
Therefore ending receivable will be half of current year sales
Hence, the ending receivables is $240
Compute cash collection for quarter 1:
Hence, the cash collected for the quarter 1 is $790
Compute ending receivables for quarter 2:
Hence, the ending receivables is $250
Compute cash collection for quarter 2:
Hence, the cash collected for the quarter 2 is $740.
Compute ending receivables for quarter 3:
Hence, ending receivables is $276.67
Compute cash collection for quarter 3:
Hence, the cash collected for the quarter 3 is $803.24.
Compute ending receivables for quarter 4:
Hence, the ending receivables is $303.33
Compute cash collection for quarter 4:
Hence, the cash collected for the quarter 4 is $883.43.
c)
To determine: The cash collection for each four quarters when the collection period is 30 days.
Introduction:
Cash collection is the amount collected through business. It is a task of accounts receivables.
Average cash collection period is the number of days taken to collect the cash from the customers.
c)
Answer to Problem 5QP
The cash collection for quarter 1 is $550, quarter 2 is $730, quarter 3 is $776.67., and quarter 4 is $856.67
Explanation of Solution
Given information:
Accounts receivables at the beginning of the year are $310, Collection period is 30days.
Compute cash collection for each four quarters:
Note: All the receivables, which are outstanding, will be collected in this current year
Compute ending receivables for quarter 1:
Therefore, the ending receivable will be half of the current year sales
Hence, the ending receivables is $480.
Compute cash collection for quarter 1:
Hence, the cash collected for the quarter 1 is $550.
Compute ending receivables for quarter 2:
Hence, the ending receivables is $500.
Compute cash collection for quarter 2:
Hence, the cash collected for the quarter 2 is $730.
Compute ending receivables for quarter 3:
Hence, the ending receivables is $553.33.
Compute cash collection for quarter 3:
Hence, the cash collected for the quarter 3 is $776.67.
Compute ending receivables for quarter 4:
Hence, the ending receivables is $606.67.
Compute cash collection for quarter 4:
Hence, the cash collected for the quarter 4 is $856.67.
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Chapter 18 Solutions
Fundamentals Of Corporate Finance, Tenth Standard Edition
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