FastBucks Inc

question 40

Multiple Choice

FastBucks Inc.has offered to set up a concentration banking system that will save three days of mail float and one day of presentation float.Your receivables average $20,000 per day and the opportunity cost of funds is 6 percent.How much would you be willing to pay FastBucks annually to administer the system perpetually?

• A)$2,400
• B)$4,800
• C)$40,000
• D)$80,000 present value of reduced float = 4 days @ $20,000
• = $80,000
• (see answer to Question 50 for valuation)
• Thus, what annuity has a present value of $40,000 when discounted at 6 percent?
• $80,000 = annuity/.06

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Definitions:

Finished Goods Ledger

A ledger that records the costs associated with the manufacturing and production of goods that are completed and ready for sale.

Stock Ledger

A record keeping system that tracks the issuance, transfer, and ownership of a company's stock shares.

First-In, First-Out

An inventory valuation method where the first items purchased or manufactured are the first to be sold, impacting the cost of goods sold and inventory valuation.

Perpetual System

An inventory accounting system that continuously updates inventory records and cost of goods sold after each purchase or sale.