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What would be the net daily benefit of opening the new account? (

What would be the net daily benefit of opening the new account? (

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Major Manufacturing currently has one bank account located in New York to handle all of its collections. The firm keeps an additional cash balance with the bank of $240,000 to pay for these services. It is considering opening a bank account with West Coast National Bank to speed up collections from its many California-based customers. Major estimates that the West Coast account would reduce collection time by 1 day on the $1.70 million a day of business that it does with its California-based customers. If it opens the account, it can reduce the balance with its New York bank to $180,000 because it will do less business in New York. However, West Coast will require an additional cash balance of $180,000. What would be the net daily benefit of opening the new account? (Enter your answer in dollars, not millions.) Net daily benefit $ 1,060,000
Transcribed Image Text:Major Manufacturing currently has one bank account located in New York to handle all of its collections. The firm keeps an additional cash balance with the bank of $240,000 to pay for these services. It is considering opening a bank account with West Coast National Bank to speed up collections from its many California-based customers. Major estimates that the West Coast account would reduce collection time by 1 day on the $1.70 million a day of business that it does with its California-based customers. If it opens the account, it can reduce the balance with its New York bank to $180,000 because it will do less business in New York. However, West Coast will require an additional cash balance of $180,000. What would be the net daily benefit of opening the new account? (Enter your answer in dollars, not millions.) Net daily benefit $ 1,060,000
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