AICPA Exam CPA-Business Topic 2 Question 103 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 103
Topic #: 2

Average daily cash outflows are $3 million for Evans Inc. A new cash management system can add two days to the disbursement schedule. Assuming Evans earns 10 percent on excess funds, how much should the firm be willing to pay per year for this cash management system?

A$3,000,000

B$1,500,000

C$600,000

D$150,000

Show Suggested Answer

Suggested Answer: B

Choice 'b' is correct. Whenever accounts receivable (AR) are decreasing when sales are increasing (and the decrease in AR is not due to an increase in bad debt write offs), this would indicate that the average collection period for AR has decreased.

Choices 'a', 'c', and 'd' are incorrect. There is insufficient information in the question to draw conclusions about these items.

by Rosalind at Nov 17, 2024, 01:20 AM

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