Free ACCA & CIMA online courses from OpenTuition
Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams
Get yours with OpenTuition discount code >>
Sign up with YouTube premium to watch our lectures Ad-free and download them to watch offline.
Specially for OpenTuition students
October 12, 2021 at 1:54 pm
Dear Sir john,
i didnt get the right answer for question 5. my working is like this (1+1%)/(1-1%)^(365/15)-1.
can you clarify it for me??
thankyou in advance.
John Moffat says
October 12, 2021 at 3:36 pm
I do not understand why you want to take (1+1%)/(1-1%).
The cost of the discount over 15 days is 1/99 which is 0.010101 (of 1.0101%).
To turn it into a yearly cost we take ((1 + 0.010101)^(365/15)) – 1
Did you watch the free lectures on this?
August 18, 2020 at 5:22 pm
Got 100% correct.
This is going to be my first paper in September 2020. If I clear this exam, the whole credit will go to you Sir.
August 19, 2020 at 6:17 am
Thank you for your comment 🙂
November 14, 2019 at 2:45 am
Thank you. Good questions
Samuel Koroma says
July 8, 2019 at 2:54 pm
Helpful questions. Thanks
August 29, 2018 at 2:17 pm
If the Qn has discount allowed and received, the amount to multiply with the discount percentage is the total AR or AP or adjust AR or AP?
August 29, 2018 at 7:47 am
Sir for Q1 you did not mention whether it is With recourse or without recourse factoring so i chose option A (2 and 3).
August 29, 2018 at 8:35 am
The question asks what may be provided (not what will be provided). They may provide insurance (depending on whether or not we pay for it).
June 28, 2016 at 9:06 am
Question 4 does not give the original time it took customers to pay-only says reduced to 60 days- it shouldnt be 365/60-it should be 365 divided by the difference between the receivables period and the period customers would get a discount in?
June 28, 2016 at 5:15 pm
No – the answer is correct.
The question tells you what the current receivables are. The saving is the interest on the difference between the current receivables and the new average receivables.
March 2, 2016 at 7:55 pm
On question 5 I have the following doubts and hope you can enlighten me:
1. Why do we use 1/99? If the discount is 3% then we use 3/97?
2. I get 1 + R = (1 + 0.010101)^(365/15) = 24.579, I have tried many times to make sure I calculate correctly, could you please confirm the answer again?
Thank you very much.
November 26, 2015 at 3:18 pm
Good Afternoon John,
You and the Opentuition crew are God sent. God bless you.
I need you to clarify question 2, because there is no overdraft interest rate how can I calculate the net cost or benefit for employing the factor?
November 26, 2015 at 3:50 pm
Since there is no mention of an interest rate, you can ignore any interest benefit.
However, there is the cost of the factor (2% x $2M) + 10,000 = 50,000
and there is the saving in irrecoverable debts (3% x $2M) = 60,000
So a net saving of 10,000.
December 1, 2015 at 6:38 pm
December 2, 2015 at 7:12 am
You are welcome 🙂
September 18, 2018 at 3:40 pm
is it misinterpretation that Administration free is saving and then plus $10,000 to earn net benefit of $30,000 per year?
November 24, 2015 at 4:46 pm
i got 4 out of 5 the last one i just guessed i couldnt understand the meaning, please explan question 5 for me
November 24, 2015 at 4:55 pm
You need to watch the firstof my free lectures on the management of receivables – then the meaning will become clear.
If you still cannot get the answer then please do post here again and I will show the workings for you.
(and congratulations on getting the other four questions correct 🙂 )
November 23, 2015 at 8:17 am
How u get the answer?
November 23, 2015 at 9:52 am
To which question?!!
When you submit an answer it tells you whether your answer is right or wrong.
If it is wrong then try again.
If you want the workings for the correct answer, then at the moment the software will not show it (it is something we are working on).
In the meantime, if you want the workings then ask here and I will show them for you.
November 25, 2015 at 3:25 am
yes sir, I need to see the working for question 4 and 5. Thank you. 🙂
November 25, 2015 at 7:14 am
The new average receivables will be 60/365 x $20M = $3,287,671
Therefore the interest saved will be 12% x (4,000,000 – 3,287,671) = $85,479
November 25, 2015 at 7:18 am
The discount is 1/99 = 0.010101 (or 1.010101%) over a period of 15 days (40 – 25).
If the yearly rate is R, then 1 + R = (1 + 0.010101)^(365/15) = 1.2771
R = 0.2771 or 27.71%
(The approach to both Question 4 and Question 5 are dealt with in detail in our free lectures on Receivables Management)
You must be logged in to post a comment.