"3. Megahurtz International Car Rentals has rent-a-car outlets throughout the world. It alsokeeps funds for transactions purposes in many foreign countries. Assume in 2003, it held100,000 reals in Brazil worth 35,000 dollars. It drew 12 percent interest, but the Brazilianreal declined 20 percent against the dollar. a. What is the value of its holdings, based on U.S. dollars, at year-end (Hint: multiply$35,000 times 1.12 and then multiply the resulting value by 80 percent.) b. What is the value of its holdings, based on U.S. dollars, at year-end if it drew9 percent interest and the real went up by 10 percent against the dollar?7-3. Solution:Megahurtz International Car Rentala. $35,000 × 1.12 = $39,200$39,200 × 80% = $31,360 dollar value of real holdingsb. $35,000 × 1.09 = $38,150$38,150 × 110% = $41,965 dollar value of real holdingsS7-6 4. Thompson Wood Products has credit sales of $2,160,000 and accounts receivableof $288,000. Compute the value of the average collection period.7-4. Solution:Thompson Wood ProductsAccounts Receivable Average collection period = Average daily credit sales $288,000 =$2,160,000/360 $288,000 = = 48days $6,000 5. Lone Star Petroleum Co. has annual credit sales of $2,880,000 and accounts receivableof $272,000. Compute the value of the average collection period.7-5. Solution:Lone Star Petroleum Co.Accounts Receivable Average collection period = Average daily credit sales $272,000 = $2,288,000/360 $272,000 = 8,000 = 34days S7-7 6. Knight Roundtable Co. has annual credit sales of $1,080,000 and an average collectionperiod of 32 days in 2008. Assume a 360-day year. What is the company’s averageaccounts receivable balance? Accounts receivable are equal to the average daily credit salestimes the average collection period.7-6. Solution:Knight Roundtable Co.$1,080,000annual credit sales = $3,000credit sales a day360days per year $3,000 average 32 average$96,000 average accounts = × daily credit sales collection periodreceivable balance 7. Darla’s Cosmetics has annual credit sales of $1,440,000 and an average collection period of45 days in 2008. Assume a 360-day year.What is the company’s average accounts receivable balance? Accounts receivable areequal to the average daily credit sales times the average collection period.7-7. Solution:Darla’s Cosmetic Company$1,440,000 annual credit sales/360 = $4,000 per day credit sales$4,000 credit sales × 45 average collection period = $180,000average accounts receivable balanceS7-8 8. In Problem 7, if accounts receivable change to $200,000 in the year 2009, while credit salesare $1,800,000, should we assume the firm has a more or a less lenient credit policy?7-8. Solution:Darla’s Cosmetics (Continued)To determine if there is a more lenient credit policy, compute theaverage collection period.Accounts Receivable Average collection period = Average daily credit sales $200,000 =$1,800,000/360 $200,000 = = 40 days $5,000 Since the firm has a shorter average collection period, it appearsthat the firm does not have a more lenient credit policy.S7-9 9. Hubbell Electronic Wiring Company has an average collection period of 35 days. Theaccounts receivable balance is $105,000. What is the value of its credit sales?7-9. Solution:Hubbell Electronic Wiring CompanyAccounts receivable Average collection period = Average daily credit sales $105,000 35 days = credit sales ?? ?? 360 ?? $105,000 Credit sales/360 =35 days Credit sales/360 = $3,000 credit sales per day Credit sales = $3,000×= 360 $1,080,000 10. Marv’s Women’s Wear has the following schedule for aging of accounts receivable.Age of Receivables, April 30, 2004(1) (2) (3) (4) Percent ofMonth of Sales Age of Account Amounts Amount DueApril .................................0–30 $88,000 ____March ...............................31–60 44,000 ____February ...........................61–90 33,000 ____January .............................91–120 55,000 ____ Total receivables ........... $220,000 100% a. Fill in column (4) for each month. b. If the firm had $960,000 in credit sales over the four-month period, compute theaverage collection period. Average daily sales should be based on a 120-day period. c. If the firm likes to see its bills collected in 30 days, should it be satisfied with theaverage collection period? d. Disregarding your answer to part c and considering the aging schedule for accountsreceivable, should the company be satisfied? e. What additional information does the aging schedule bring to the company that theaverage collection period may not show?S7-10 "