WHY IS IT IMPORTANT TO COLLECT ACCOUNTS RECEIVABLE AS SOON AS POSSIBLE?The purchase had payment terms of 2/15 N/30. Millbridge earns four percent on its idle cash.
On page 251 in your textbook, please complete problems 7-29 through 7-33 listed below for convenience. Compile your answers in a Word document, and upload it in Blackboard.
Answer the following problems:
7-29. Millbridge Hospital buys its supplies in bulk and has recently switched vendors. The first purchase Millbridge made was for 500 boxes of gauze at $3.46 a box. The purchase had payment terms of 2/15 N/30. Millbridge earns four percent on its idle cash. Should it take the discount or not? Justify your answer by showing calculations. (Refer to Appendix 7-B to solve this problem.)
7-30. Meals for the Homeless usually experiences seasonality in its cash balances. In December, contributions from donors increase its cash balances, and then these balances are used throughout the following year. By the fall, Meals for the Homeless has a tight cash flow. It has a line of credit with its bank, which allows it to draw up to $500,000 at seven percent interest per year. During 2013, Meals for the Homeless draws down $135,000 on October 1 and repays it at the start of business on January 3, 2014—exactly 94 days later. How much should it pay back on January 3, and how much of that is interest?
7-31. Meals for the Homeless has many sources of income, but they pay Meals very differently. Specifically, Meals has contracts with the city, county, and state to provide food services. In addition, Meals has contracted with a private foundation to augment its foods with more healthful options. The city owes Meals $400,000, half of which is current, one-quarter is more than 30 days but less than 61 days old, 15% is between 61 and 90 days old, and the remainder is more than 91 days old. The county owes Meals $900,000, only one-third of which is current, another one-third is more than 30 days but less than 61 days old, and the remainder is more than 90 days old. The state owes Meals $1.5 million, 40% is current, 30% is between 30 and 60 days old, 20% is between 61 and 90 days old, and the remainder is more than 91 days old. The foundation owes Meals $150, 000, of which half is current and the other half is more than 30 days but less than 61 days old. Prepare an accounts-receivable aging schedule for Meals by total dollars and percent.
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