5. Sales terms call for a 2 percent discount if paid within the first 10 days of the month after sale. Based on prior experience, 70 percent of the sales are collected within the discount period, 20 percent are collected by the end of the month after sale, 8 percent are collected in the following month, and 2 percent are uncollectible. Actual sales for October and November are $10,000 and $20,000, respectively. Compute the cash collections forecast for December.
6. Wise Corporation is considering entering into a lockbox arrangement which will have a yearly cost of $115,000. Average daily collections are $380,000. The lockbox system will reduce float time by 2 days. The rate of return is 16 percent. Should the lockbox system be implemented?