Roze Corporation Is Investigating a Lockbox System to Reduce Its

question 335

Multiple Choice

Roze Corporation is investigating a lockbox system to reduce its collection time. It has determined that on average, there are 405 payments with an average value of $1,200 each. If a lockbox system is implemented, the lockbox fee per transaction will be $0.65. If the collection time can be reduced by 4 days, and the daily interest on money market securities is.03%, then determine present value of adopting the system.

• A) $1,944,000
• B) $1,854,000
• C) $1,764,000
• D) $1,674,000
• E) $1,584,000

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Definitions:

Credit

An accounting entry that increases liabilities or equity, or decreases assets, reflecting the value of transactions where goods, services, or cash are received.

Cash Account

A financial account that tracks the amount of cash inflows and outflows, representing the company's liquid assets.

Increases

The act or process of becoming larger or greater in size, amount, number, or degree.

Posting

The process of transferring the debits and credits from the journal entries to the accounts.