Question

The following information applies to Nichola Manufacturing Company, which has a 6-month operating cycle:Cash sales $100,000 Credit sales during the sixth month with net 30 days terms 150,000 Credit sale during the fifth month with special terms of net 9 months 10,000 Interest earned and accrued on an investment that matures during month 3 of the next cycle 2,000. The total of Nichola’s trade accounts receivable at the end of the current cycle is:a. $160,000b. $152,000c. $260,000d. $262,000

Answer 1

Answer:

A) $160,000

Explanation:

To calculate Nichola's accounts receivable at the end of the current business cycle we have to add credit sales during the fifth and sixth months:

accounts receivables = $150,000 + $10,000 = $160,000

The credit sales made during the sixth month should be received during the seventh month and the credit sales made during the fifth month should be paid next year (in 9 months). Since the business cycle is only 6 months long, any credit sale that should be collected beyond the sixth month, should be included under accounts receivables.