You Are Considering Implementing a Lockbox System for Your Firm

question 163

Multiple Choice

You are considering implementing a lockbox system for your firm. The system is expected to reduce the collection time by 1 day. On an average day, your firm receives 90 checks with an average value of $105 each. The daily interest rate on Treasury bills is.03 %. The bank charge per check would be $.25. What is the anticipated daily cost of the lockbox system?

• A) $2.70
• B) $2.84
• C) $12.60
• D) $22.50
• E) $26.25

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Definitions:

Percent of Sales Method

A financial forecasting model that estimates changes in balance sheet accounts by using a fixed percentage of projected sales.

Uncollectible Expenses

Expenses recognized from debts or receivables that are deemed uncollectible and written off as a loss.

Credit Sales

Sales made on credit, allowing the customer to pay at a later date, typically generating accounts receivable.

Credit Balance

A situation in an account where the total credits exceed the total debits, indicating a positive balance or amount owed to that account.