A firm is planning for next year and has developed the following information What receivables balance should the firm plan for next year if management intends to reduce the ACP by five days? (Calculate using ending balances and a 360-day year):
A)$1.035M
B)$1.150M
C)$1.265M
D)None of the above

Question

A firm is planning for next year and has developed the following information  What receivables balance should the firm plan for next year if management intends to reduce the ACP by five days? (Calculate using ending balances and a 360-day year):
A)$1.035M 
B)$1.150M 
C)$1.265M 
D)None of the above

Quizplus · Accepted Answer

Receivables balance = Annual credit sales / ACP
Current receivables balance = $10.8M / 31 days * 360 days = $12.096M
New ACP = 31 days - 5 days = 26 days
New receivables balance = $10.8M / 26 days * 360 days = $11.88M
Ending receivables balance = ($12.096M + $11.88M) / 2 = $1.035M.

A Firm Is Planning for Next Year and Has Developed