Reston Inc

question 48

Multiple Choice

Reston Inc.has expected sales of R17,000,000.While 10 percent of its customers pay cash, the remaining 90 percent pay on credit with 40 percent paying on Day 10, 30 percent paying on Day 20, 15 percent paying on Day 25, and 15 percent paying on Day 30.Assume that the cost of funds invested in receivables is 10 percent.Suppose that the firm's customers begin paying later, such that the new DSO increases to 24 days, that the firm uses a 360-day year, and that the firm's variable cost ratio is 80 percent.What is the additional interest cost to Reston of the additional investment in A/R caused by the delay in payment by its customers?

• A) R19,550
• B) R24,438
• C) R42,500
• D) R78,625
• E) R102,000

---

Definitions:

GASB

The Governmental Accounting Standards Board, which establishes accounting standards for state and local governments in the United States.

Monetary Transfers

Financial transactions that involve the movement of money from one party to another, which can be domestic or international in nature.

Fund Balance―Nonspendable

The portion of a government's fund balance that cannot be spent because it is either not in spendable form or legally or contractually required to be maintained intact.

General Fund

A primary accounting fund used by a government to record its general operating revenues and expenses.