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practice question no.4 Ruby Plc

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › practice question no.4 Ruby Plc

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
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  • Author
    Posts
  • October 22, 2015 at 1:46 pm #278401
    Amirah
    Member
    • Topics: 6
    • Replies: 6
    • ☆

    Hi sir,

    May I ask why is the proposed level of receivables = (4,000,000 – 266,667) x (26/365) = 283,000 instead of 4,000,000 x (1/3 x 26 + 2/3 x 14) / 365 = 197,260 since two-thirds of the customers are taking the discount which means they are paying within 14 days? I don’t quite get it.

    October 22, 2015 at 4:53 pm #278442
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    It is because the question says that “the average credit period taken by customers is 26 days”.

    So in arriving at 26 days they have already taken into account that some will take longer and some will pay quicker. 26 days is already the average.

    October 23, 2015 at 12:48 pm #278552
    Amirah
    Member
    • Topics: 6
    • Replies: 6
    • ☆

    Understood, thanks for your reply!

    October 23, 2015 at 1:11 pm #278562
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    You are welcome 🙂

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