A bank is analysing the receivables of Rolly Ltd. in order to identify acceptable collateral for a short-term loan. The company's credit policy is 2/10 net 30. The bank lends 75% on accounts where customers are not curre

The Rolly Ltd. credit policy is 2/10 net 30. The bank lends 75 per cent on accounts where customers are not currently overdue and where the average payment period does not exceed 10 days past the net period i.e. thirty days. From the schedule of receivables of Rolly Ltd., this is observed that Account No. 90 and Account No. 141 are currently overdue and for Account No. 173 the average payment period exceeds 40 days so these accounts does not fulfill the credit eligibility criterion of bank and hence, the Account Nos. 90, 141 and 173 are eliminated for the purpose of calculation of credit. Therefore, the selected Accounts are Account Nos. 70, 110, 111 and 161. Statement showing the calculation of the amount which the bank will lend on a pledge of receivables if the bank uses a 10 per cent allowances for cash discount and returns Account No. Amount (₹) Allowances for cash discount and returns 10% of Col. 2 Net Amount (Col 2-Col 3) Loan amount @ 75% of Col. 4 70 50,000 5,000 45,000 33,750 110 23,000 2,300 20,700 15,525 111 4,600 460 4,140 3,105 161 58,000 5,800 52,200 39,150 Total Loan Amount 91,530