Problems:(A) Understanding Receivables:ABC sells on credit terms of 2/10, n/30. Daily sales average 200 units at P2,500 each throughout the 365-day year. All salesare on credit. On average, 40% take the cash discount by paying on tenth day while the remaining 60% pay on the 30th day.It is planning to change the credit terms to 2/10, n/25. If this change was done, daily sales will be 180 units. Around 45% willpay on the tenth day while the remaining 55% will pay on the 25n day.1. What is the original average accounts receivable balance based on the given?2. What is the original average collection period of the receivables in days?3. What is the original receivable turnover? Round off to two decimal places.

Solution: Accounts receivable is defined as those customers who have purchased the goods or taken…

Answered: Problems: (A) Understanding…

Problems: (A) Understanding Receivables: ABC sells on credit terms of 2/1o, n/30. Daily sales average 200 units at P2,500 each throughout the 365-day year. All sales

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Problems:
(A) Understanding Receivables:
ABC sells on credit terms of 2/10, n/30. Daily sales average 200 units at P2,500 each throughout the 365-day year. All sales
are on credit. On average, 40% take the cash discount by paying on tenth day while the remaining 60% pay on the 30th day.
It is planning to change the credit terms to 2/10, n/25. If this change was done, daily sales will be 180 units. Around 45% will
pay on the tenth day while the remaining 55% will pay on the 25n day.
1. What is the original average accounts receivable balance based on the given?
2. What is the original average collection period of the receivables in days?
3. What is the original receivable turnover? Round off to two decimal places.

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