a.
To determine: The net pre-tax benefits if annual sales are $15 million.
a.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $15 million is $8,630.14.
Explanation of Solution
Determine the annual pre-tax earnings
Therefore, the amount of funds released is $8,630.14.
Determine the additional collection costs
Therefore, the additional collection costs is $14,250.
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is -$5,619.86.
b.
To determine: The net pre-tax benefits if annual sales are $75 million.
b.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $75 million is $28,900.68.
Explanation of Solution
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is -$28,900.68.
c.
To determine: The net pre-tax benefits if annual sales are $15 million with 2 days of collection time.
c.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $15 million is $2,753.42.
Explanation of Solution
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is $2,753.42.
d.
To determine: The net pre-tax benefits if annual sales are $75 million with 2 days of collection time.
d.
Answer to Problem 6P
The net pre-tax benefits if annual sales are $75 million is $25,767.12.
Explanation of Solution
Determine the net pre-tax benefits
Therefore, the net pre-tax benefits is $25,767.12.
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Chapter 17 Solutions
Contemporary Financial Management, Loose-leaf Version
- Laboratory Management deposited into its account at Pulaski Bank a check issued by Fairway Farms in the amount of $150,000. The date of deposit was February 5. Pulaski, the depositary bank, initiated the collection process immediately by forwarding the check to Worthen Bank on the sixth. Worthen sent the check on for collection to M Bank Dallas, and M Bank Dallas, still on February 6, delivered the check to M Bank Fort Worth. That same day, M Bank Fort Worth delivered the check to the Fort Worth Clearinghouse. Because TAB/West Side, the drawee/payor bank, was not a clearinghouse member, it had to rely on TAB/Fort Worth for further transmittal of the check. TASI, a processing center used by both TAB/Forth Worth and TAB/West Side, received the check on the sixth and processed it as a reject item because of insufficient funds. On the seventh, TAB/West Side determined to return the check unpaid. TASI gave M Bank Dallas telephone notice of the return on February 7 but physically misrouted…arrow_forwardDouglas and Son, Inc., uses the following process for its cash receipts: The company typically receives cash and check sales each day and places them in a single drawer. Each Friday, the cash clerk records the amount of cash received and deposits the money in the bank account. Each quarter, the controller requests information from the bank necessary to prepare a bank reconciliation.Required:Discuss Douglas and Son’s internal control procedures related to cash receipts, noting both weaknesses and strengths.arrow_forwardNext, consider the case of Washburn Flooring Company: The management at Washburn Flooring has determined that it takes an average of 6 days for checks the company writes to clear its bank account. Cash receipts from customers are reflected in Washburn's bank account an average of 2 days after the checks are received. On an average day, Washburn writes checks that total $40,000, and it receives checks from customers that total $50,000. Compute the collection float, the disbursement float, and the net float in dollars in the following table. (Note: By definition, collection float is always considered negative, and disbursement float is always positive. Both should be shown as positive numbers here. The net float, however, should be shown as positive if it is favorable and as negative if it is unfavorable.) Washburn Flooring Company Float Calculations Collection float Disbursement float Net float Given this information, you can deduce that on an average day, Washburn Flooring's bank…arrow_forward
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- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT