Question 1.

1.5 million (300k) = 1.2 million

Question 2.

Question 3

Question 4
Question 5
The following data pertains to HAHN Corp:
HAHN Corp’s payment to suppliers HAHN Corp’s collection from customers
(In number of days) (In number of days)
Mail time 4 Mail time 3
Processing delay 3 Processing delay 2
Clearing delay 1 Clearing delay 1
HAHN Corp’s daily payments average P1 000; daily collections average P1 500.
1. How much is the average daily disbursement float? 1k*8= 8,000
2. How much is the average daily collection float? 1500*6=9,000
3. How much is the net float? 8,000-9,000= (1,000)

Question 6 (Research your answer)

Question 7

90M/365= 246575
*3 days
= 739726 * .08
savings = 59178
cot (80000)
loss = 20822
Question 8

2500*300= 750000

90000/8%= 1125000
1125000/ 750000= 1.5
Question 9

Question 10

Diane Corp sells on terms 3/5, net 20. Sales for the year total P912,500. Forty percent pay on the fifth
day and take discounts; the other 60% pay on average 40 days after purchases. What is the average
amount of accounts receivable? (365 days / year). 912500/365= 2500

Question 11 40%* 5= 2 + (60%*40=24) =26

2500*26= 65,000
MIA Co. is considering changing its credit terms from 2/15, n/30 to 3/10, n/30 in order to speed up
collections. At present, 40% of MIA Co.’s customers take the 2% discount. Under the new term, discount
customers are expected to rise to 50%. Regardless of the credit terms, half of the customers who do not
take the discount are expected to pay on time, whereas the remainder will pay 10 days late. The change
does not involve a relaxation of credit standards; therefore, bad debt losses (per peso sales) will remain
at status quo.

Currently bad debts expense is 2% of sales. However, the more generous cash discount terms are
expected to increase sales from P2 000 000 to P2 600 000 per year. MIA Co.’s variable cost ratio is 75%,
the interest rate on funds invested in accounts receivable is 9%, and the firm’s income tax rate is 40%.
(360 days/year) What is the incremental after-tax profit from the change in credit terms? 68494

Question 12

KATE Co. is planning to introduce changes in its collection procedures. The new procedures are expected
to make the collection period longer by 10 days, although there will be no change in bad debts. For the
coming year, KATE Co.’s budgeted sales is P32 400 000 or P90 000 per day. Short-term interest rates are
expected to average at 9% per annum.
1. As a result of the changes in collection procedures, KATE Co.’s average AR balance will increase
(decrease) by? 90000*10 days = 900000
2. To make the changes in collection procedures cost-beneficial, the minimum savings in collection costs
for the coming year should be? 900000*9%= 81000
Question 13

Question 14

720000
720000*80%= (576000)
= 144000
120329 Carrying cost= (23671) = 720k/365 *80% * 20%
= 120329