Kuwait City Castings (KCC) is attempting to obtain the maximum loan possible using accounts receivable as collateral. The firm extends net-30-day credit. The amounts that are owed KCC by its 12 credit customers, the average age of each account, and the customer's average payment period are as shown in the following table.

a. If the bank will accept all accounts that can be collected in 45 days or fewer as long as the customer has a history of paying within 45 days, which accounts will be acceptable? What is the total U.S. dollar amount of accounts receivable collateral?
b. In addition to the conditions in part a, the bank recognizes that 5 percent of credit sales will be lost to returns and allowances. Also, the bank will lend only 80 percent of the acceptable collateral (after adjusting for returns and allowances). What level of funds would be made available through this lending source?

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Account receivable Average age of account Average payment period of customer Customer USS37,000 42,000 15,000 8,000 50,000 12,000 24,000 46,000 3,000 22,000 62,000 80,000 40 days 25 40 30 31 28 30 29 30 30 days 50 60 35 40 30 70 40 65 35 40 70 35 60