1. Prepare collection effectiveness index (CEI) for accounts receivable using the following information: A/R balance 1/1 $ 20, 000; credit sales during January $10,000; Ending A/R January 31; and current A/R (not yet due) $5,800.
2. Calculate the cost of credit using formula: (Discount %/(1-Discount percent)X(360/Allow days-Discount days)) Use the Credit granting facts 2/10 net 30; 360 days instead of 365 days in a year. See page 31 of textbook for example.
3. Prepare a) an aging of accounts receivable using probability of non-collection using customer A 0-30 days 1% and balance A/R $10,000; 31-60 days 5% and A/R balance $5,000; 61-90 days 20% and balance A/R $1,000. b) Based on sales revenues $50,000 experience uncollectible based on credit sales 2%.