Question 1

On April 14,McCallister's purchased $7,800 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

Accepted Answer

A)  $200; 14.95
B)  $156; 44.59
C)  $400; 14.95
D)  $400; 27.38
E)  $400; 44.59F) A) and C)
G) B) and D)

Question 2

The transaction motive refers to the need to hold cash:

Accepted Answer

A)  as a safety margin.
B)  for unforeseen investment opportunities.
C)  for daily operations.
D)  as a financial reserve.
E)  for emergency situationsF) A) and B)
G) A) and C)

Question 3

Harvest Foods generally receives three checks a month in the amounts of $38,950,$16,750,and $63,800.It takes an average of one day for the funds from these checks to be added to the firm's available balance at the bank once they have been deposited.What is the amount of the average daily float? Assume a 30-day month.

Accepted Answer

A)  $4,333.33
B)  $3,983.33
C)  $4,209.33
D)  $3,506.00
E)  $4,020.00F) All of the above
G) C) and D)

Question 4

Taylor's Market received five checks today and went to the bank to deposit all of them.Unfortunately,the bank was closed for the day due to a robbery.How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Accepted Answer

A)  Collection float increased
B)  Collection float decreased
C)  Disbursement float increased
D)  Disbursement float decreased
E)  Net float remained unchangedF) A) and B)
G) C) and E)

Question 5

Which statement is correct?

Accepted Answer

A)  Disbursement float is the period of time between a firm making a bank deposit and the funds from that deposit being available to the firm.
B)  Disbursement float decreases when a check is delayed in the mail due to an extended holiday weekend.
C)  Disbursement float causes the available balance to exceed the ledger balance.
D)  Disbursement float is being totally eliminated by the Check Clearing Act for the 21stCentury.
E)  Disbursement float exists when the available balance is less than the book balance.F) A) and C)
G) A) and E)

Question 6

For which one of the following instruments does a bank guarantee payment by the buyer?

Accepted Answer

A)  Money market preferred stock
B)  Commercial paper
C)  Banker's acceptance
D)  Invoice
E)  Time draftF) B) and C)
G) B) and E)

Question 7

A (n) _____ is a subsidiary of a firm that exists solely to handle the credit functions of the parent company.

Accepted Answer

A)  internal credit organization
B)  bank
C)  credit association
D)  captive finance company
E)  credit unionF) D) and E)
G) B) and E)

Question 8

Electronics and More offers credit terms of 2/7,net 30.What is the effective annual rate on a $4,500 purchase if you forgo the discount?

Accepted Answer

A)  41.83 percent
B)  38.59 percent
C)  44.99 percent
D)  37.80 percent
E)  32.58 percentF) A) and E)
G) B) and C)

Question 9

Which one of the following is most commonly used in international trades?

Accepted Answer

A)  Sight draft
B)  Time draft
C)  Commercial paper
D)  Banker's acceptance
E)  Open accountF) A) and D)
G) A) and B)

Question 10

Which one of the following best illustrates the concept of derived demand?

Accepted Answer

A)  A minimum wage worker tends to buy more off-brand products than do more highly paid professionals.
B)  A windshield company has to step up production because auto sales are increasing.
C)  A grocery store is selling more fresh fruits and vegetables.
D)  Restaurant sales are rising because unemployment is falling.
E)  Retail stores have increased sales around the holiday season.F) A) and B)
G) A) and E)

Question 11

Stinkey sells 2,250 units of its perfume collection each year at a price per unit of $199.All sales are on credit with terms of 2/7,net 30.The discount is taken by 91 percent of the customers.What is the average amount of the company's accounts receivable?

Accepted Answer

A)  $11,126
B)  $11,246
C)  $11,003
D)  $14,815
E)  $14,778F) A) and B)
G) A) and C)

Question 12

Alicia wrote a check for $18 on Friday,May 6.The check cleared the bank on Wednesday,May 11.There were no other checks or deposits outstanding during the month.Given this,which one of the following statements is correct?

Accepted Answer

A)  On May 6, the available balance decreased by $18.
B)  On May 11, the available balance was $18 less than the ledger balance.
C)  On May 12, the ledger balance was $18 less than the available balance.
D)  On May 14, the available balance increased by $18.
E)  On May 10, the ledger balance was $18 less than the available balance.F) C) and D)
G) All of the above

Question 13

How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?

Accepted Answer

A)  Immediately
B)  In one day
C)  Between one and two days
D)  In two days
E)  Between two and three daysF) C) and E)
G) A) and D)

Question 14

On any given day,Althea's receives and deposits numerous checks worth an average combined total of $4,328.The funds from these checks are generally available in 1.2 days.Every day the firm mails out checks totaling $3,010 that generally take 2.5 days to clear the bank.What is the amount of the disbursement float if the opening bank balance was $828 with no outstanding items?

Accepted Answer

A)  $6,828
B)  $5,169
C)  $5,194
D)  $7,525
E)  $7,778F) C) and D)
G) None of the above

Question 15

Which of these practices will reduce a firm's collection float?
I.Installing a lockbox system
II.Utilizing zero-balance accounts
III.Depositing checks daily rather than weekly
IV.Reducing the processing delay by one day

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, II, and III only
D)  I, III, and IV only
E)  I, II, III, and IVF) A) and C)
G) B) and C)

Question 16

Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?

Accepted Answer

A)  Cash budget
B)  5 C&rsquo;s of credit
C)  Credit analysis
D)  Aging schedule
E)  Credit scoring reportF) C) and D)
G) B) and E)

Question 17

The Dog House offers credit terms of 2/7,net 20 to all of its customers.Historically,93 percent of its customers take advantage of the discount.What is the firm's average collection period?

Accepted Answer

A)  7.91 days
B)  7.67 days
C)  8.20 days
D)  8.33 days
E)  9.08 daysF) A) and C)
G) B) and E)

Question 18

Used Furniture sells 1,330 sofas a year at an average price per sofa of $549.The carrying cost per unit is $31.60.The company orders 75 sofas at a time and has a fixed order cost of $69 per order.The sofas are sold out before they are restocked.What is the economic order quantity?

Accepted Answer

A)  76 sofas
B)  72 sofas
C)  81 sofas
D)  98 sofas
E)  101 sofasF) B) and D)
G) All of the above

Question 19

As of Monday morning,the ledger balance and the available balance for a firm was $2,100.During the day,the firm wrote three checks in the amounts of $674,$420,and $236.The firm deposited a check for $387 and a check for $638.What is the amount of the collection float as of the end of the day assuming none of these checks have cleared?

Accepted Answer

A)  $305
B)  $1,330
C)  $840
D)  $1,025
E)  $2,355F) B) and E)
G) A) and B)

Question 20

Which of these would be the most common evidence of indebtedness when a sale is made on open account?

Accepted Answer

A)  Sight draft
B)  Commercial draft
C)  Banker's acceptance
D)  Promissory note
E)  InvoiceF) B) and C)
G) A) and D)

Exam 17: Working Capital Management

The Dog House offers credit terms of 2/7,net 20 to all of its customers.Historically,93 percent of its customers take advantage of the discount.What is the firm's average collection period?

Correct Answer
verified

A (n) _____ is a subsidiary of a firm that exists solely to handle the credit functions of the parent company.

Correct Answer
verified

Electronics and More offers credit terms of 2/7,net 30.What is the effective annual rate on a $4,500 purchase if you forgo the discount?

Correct Answer
verified

Which of these practices will reduce a firm's collection float? I.Installing a lockbox system II.Utilizing zero-balance accounts III.Depositing checks daily rather than weekly IV.Reducing the processing delay by one day

Correct Answer
verified

Used Furniture sells 1,330 sofas a year at an average price per sofa of $549.The carrying cost per unit is $31.60.The company orders 75 sofas at a time and has a fixed order cost of $69 per order.The sofas are sold out before they are restocked.What is the economic order quantity?

Correct Answer
verified

Which of these would be the most common evidence of indebtedness when a sale is made on open account?

Correct Answer
verified

Correct Answer
verified

Stinkey sells 2,250 units of its perfume collection each year at a price per unit of $199.All sales are on credit with terms of 2/7,net 30.The discount is taken by 91 percent of the customers.What is the average amount of the company's accounts receivable?

Correct Answer
verified

Which one of the following is most commonly used in international trades?

Correct Answer
verified

The transaction motive refers to the need to hold cash:

Correct Answer
verified

Which statement is correct?

Correct Answer
verified

For which one of the following instruments does a bank guarantee payment by the buyer?

Correct Answer
verified

Which one of the following best illustrates the concept of derived demand?

Correct Answer
verified

Alicia wrote a check for $18 on Friday,May 6.The check cleared the bank on Wednesday,May 11.There were no other checks or deposits outstanding during the month.Given this,which one of the following statements is correct?

Correct Answer
verified

How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?

Correct Answer
verified

Correct Answer
verified

Taylor's Market received five checks today and went to the bank to deposit all of them.Unfortunately,the bank was closed for the day due to a robbery.How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Correct Answer
verified

Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?

Correct Answer
verified

Correct Answer
verified

On April 14,McCallister's purchased $7,800 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _ and the effective annual rate is _ percent.

Correct Answer
verified

Exam 17: Working Capital Management

The Dog House offers credit terms of 2/7,net 20 to all of its customers.Historically,93 percent of its customers take advantage of the discount.What is the firm's average collection period?

Correct AnswerverifiedShow Answer

A (n) _____ is a subsidiary of a firm that exists solely to handle the credit functions of the parent company.

Correct AnswerverifiedShow Answer

Electronics and More offers credit terms of 2/7,net 30.What is the effective annual rate on a $4,500 purchase if you forgo the discount?

Correct AnswerverifiedShow Answer

Which of these practices will reduce a firm's collection float? I.Installing a lockbox system II.Utilizing zero-balance accounts III.Depositing checks daily rather than weekly IV.Reducing the processing delay by one day

Correct AnswerverifiedShow Answer

Used Furniture sells 1,330 sofas a year at an average price per sofa of $549.The carrying cost per unit is $31.60.The company orders 75 sofas at a time and has a fixed order cost of $69 per order.The sofas are sold out before they are restocked.What is the economic order quantity?

Correct AnswerverifiedShow Answer

Which of these would be the most common evidence of indebtedness when a sale is made on open account?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Stinkey sells 2,250 units of its perfume collection each year at a price per unit of $199.All sales are on credit with terms of 2/7,net 30.The discount is taken by 91 percent of the customers.What is the average amount of the company's accounts receivable?

Correct AnswerverifiedShow Answer

Which one of the following is most commonly used in international trades?

Correct AnswerverifiedShow Answer

The transaction motive refers to the need to hold cash:

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

For which one of the following instruments does a bank guarantee payment by the buyer?

Correct AnswerverifiedShow Answer

Which one of the following best illustrates the concept of derived demand?

Correct AnswerverifiedShow Answer

Alicia wrote a check for $18 on Friday,May 6.The check cleared the bank on Wednesday,May 11.There were no other checks or deposits outstanding during the month.Given this,which one of the following statements is correct?

Correct AnswerverifiedShow Answer

How quickly can a bank receive payment once it transmits a copy of a check to the bank on which the check was drawn?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Taylor's Market received five checks today and went to the bank to deposit all of them.Unfortunately,the bank was closed for the day due to a robbery.How does the bank closure affect the firm's float assuming these five checks are the only outstanding bank items?

Correct AnswerverifiedShow Answer

Which report identifies the percentage of accounts receivable that are delinquent by 90 days or more?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On April 14,McCallister's purchased $7,800 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

Correct AnswerverifiedShow Answer

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On April 14,McCallister's purchased $7,800 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _ and the effective annual rate is _ percent.

Correct Answer
verified