Accounts receivable as collateralKansas City Castings (KCC) is attempting to obtain the maximum loan possible using accounts receivable as collateral. The firm extends net-30-day credit. The amounts that are owed KCC by its 12 creditcustomers, the average age of each account, and the customer's average payment period are as shown in the following table:

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.a.If the bank will accept all accounts that can be collected in 45 days or less as long as the customer has a history of paying within 45 days, which accounts will be acceptable? What is the total dollar amount of accounts receivable collateral?

(Note:

Accounts receivable that have an average age greater than the customer's average payment period are also excluded.)b.In addition to the conditions in part

a,

the bank recognizes that

10%

of credit sales will be lost to returns and allowances. Also, the bank will lend only

90%

of the acceptable collateral (after adjusting for returns and allowances). What level of funds would be made available through this lending source?

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Part 1

a. If the bank will accept all accounts that can be collected in 45 days or less as long as the customer has a history of paying within 45 days, which accounts will be acceptable?(Select the best answer below.)

A.

A, B, C, G, I, L

B.

B, D, F, G, J, K

C.

A, E, H, I, K, L

D.

D, E, F, H, J, K

Part 2

What is the total dollar amount of accounts receivable collateral?(Select the best answer below.)

A.

$198,000

B.

$194,000

C.

$169,000

D.

$150,000

Part 3

b.In addition to the conditions in part

a,

the bank recognizes that

10%

of credit sales will be lost to returns and allowances. Also, the bank will lend only

90%

of the acceptable collateral (after adjusting for returns and allowances). What level of funds would be made available through this lending source?(Select the best answer below.)

A.

$121,500

B.

$136,890

C.

$160,380

D.

$157,140

A $25,000 50 days 35 days B $37,000 55 days 70 days C $24,000 35 days 50 days D $12,000 26 days 30 days E $35,000 21 days 30 days F $26,000 35 days 40 days G $31,000 50 days 65 days H $14,000 25 days 35 days I $25,000 40 days 50 days J $16,000 28 days 40 days K $47,000 20 days 30 days L $52,000 45 days 60 days