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AICPA Exam CPA-Business Topic 2 Question 103 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 103
Topic #: 2
[All CPA-Business Questions]

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?

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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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Jordan
13 days ago
Ooh, this one's a real cash cow! I'm thinking C) $600,000 is the way to go. That's a pretty sweet deal if you ask me.
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Mike
16 days ago
Haha, I bet the guys at Evans are feeling like a million bucks with this new cash management system! I'm gonna go with A) $3,000,000 just to be safe.
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Ryann
1 days ago
I think A) $3,000,000 sounds like a good choice.
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Malcolm
1 months ago
I'm not sure. I think the answer might be A) $3,000,000. Can someone explain the rationale behind choosing C) $600,000?
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Valene
1 months ago
I'm pretty sure the answer is D) $150,000. I mean, who wouldn't want to save $150,000 per year? That's a steal!
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Chantay
1 months ago
Wow, this is a tricky one. I'm going to go with B) $1,500,000 since that seems like a reasonable amount for a new cash management system.
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Stephanie
1 months ago
I agree with Dylan. The firm should be willing to pay $600,000 for the cash management system because it can earn 10 percent on excess funds.
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Frederica
1 months ago
Hmm, I think the correct answer is C) $600,000. Adding two days to the disbursement schedule would save Evans $3 million x 2 days = $6 million per year, and with a 10% return, that's $600,000 in savings.
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Willodean
10 days ago
It's a smart investment for the company to make.
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Kirk
11 days ago
So, Evans should be willing to pay $600,000 per year for the cash management system.
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Lyndia
17 days ago
That makes sense, $6 million in savings with a 10% return is $600,000.
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Huey
19 days ago
I agree, the correct answer is C) $600,000.
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Dylan
1 months ago
I think the answer is C) $600,000.
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