Mock exam Question no 6

You do not say which mock exam you are referring to. If you mean our mock exam, then the questions are chosen at random from a large bank of questions and therefore question 6 will be different each time. You will have to copy and paste the question in order for me to be able to find it.

Yes, it is mock that is on your website. I am unable to copy paste the question. But the question is regarding Fling Co. The question asks to calculate the Net savings if the company proposes a discount.

I do not know how you arrived at $1,875, so I cannot explain why you went wrong. The workings for the correct answer are as follows: Current receivables = 750,000 New receivables period = (35% x 30) + (65% x 60) = 49.5 days. Therefore new receivables = 49.5/360 x $4.5M = 618,750 Therefore interest saving = (750,000 – 618,750) x 8% = $10,500 Cost of discount = 35% x 0.5% x $4,500,000 = $7,875 Therefore net saving = 10,500 – 7,875 = $2,625 I assume that you had watched my free lectures on the management of receivables before attempting the mock exam?

Oh, I found my mistake! Thanks

You are welcome :-)