1)

Mervyns Fine Fashions has an average collection period of 35 days. The accounts receivable balance is $56,000.

What is the value of its annual credit sales? (Use a 360-day year.)

Annual credit sales

$

2)

Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.

a.	If Neon Light Company has $2.55 million per day in collections and $1.11 million per day in disbursements, how many dollars will the cash management system free up? (Enter your answer in dollars not in millions (e.g., $1,234,567).)

Freed-up funds

$

b.	If Neon Light Company can earn 7 percent per annum on freed-up funds, how much will the income be? (Enter your answer in dollars not in millions (e.g., $1,234,567).)

Interest on freed-up cash

$

c.

If the total cost of the new system is $430,000, should it be implemented?

Yes

No

3)

Oral Roberts Dental Supplies has annual sales of $6,615,000. Eighty percent are on credit. The firm has $882,000 in accounts receivable.

Compute the value of the average collection period. (Do not round intermediate calculations. Use a 360-day year.)

Average collection period

days

4)

Compute the cost of not taking the following cash discounts. (Use a 360-day year. Do not round intermediate calculations. Input your final answers as a percent rounded to 2 decimal places.)

		Cost of Lost Discount
a.	3/17, net 65.	%
b.	2/25, net 45.	%
c.	4/17, net 40.	%
d.	4/17, net 170.	%