Annual credit sales of T Corporations are $540,000, having credit terms of net 60 days. 60 days is the average collection period for the company. The management of the company is plannito make changes in credit terms and adopt credit terms of 3/25, net 60. It is expected that all customers would be paying on the last day of discount period. Management decided to usedecrease in account receivable to pay off bank loan which costs company 12%. Also, the management forecasted that the new policy would increase sales by 12%,Assume that the company earns 25% on sales before any discount, calculate the net change in income if the new credit terms are adopted. (Consider 1 year = 360 days)$5,742$3.816$4,596$2.674

Increased sales:New sales: $604,800 (12% increase)New accounts receivable:Current: $90,000 (60…

Answered: Annual credit sales of T Corporations…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Some data regarding the financial enterprise are as follows;- The company collects its sales 25% in cash, 40%: 1 month term and the remainder with 2 months maturity.- Purchases are made in advance.- It is required to have 50000 balances in the cash register of the company at all times.- In cases where there is a deficit, credit will be used from the management bank and this deficit will be closed. Likewise, in cases of excess, the loans used from the relevant bank will be closed.- There is 35000 cash in the company account as of 30.04.2021. In addition, the company owes 75000 loans to the management bank as of the same date. When the cash budget of the enterprise for the period of May-August 2021 is prepared, what is the "cumulative loan" balance for August 2021?
ABC Corp. has net credit sales of P1,440,000 yearly with credit terms of n/30, which is also the average collection period. BECK does not offer discounts for early payment; thus, customers take the full 30 days to pay. (Use 360 days/year) 1.What is the average receivable balance? 2.What is the accounts receivable turnover?
Medwig Corporation has a DSO of 17 days. The company averages $8,500 in sales each day (all customers take credit). What is the company's average accounts receivable? Assume a 365-day year. Round your answer to the nearest dollar.
17
Medwig Corporation has a DSO of 32 days. The company averages $8,000 in sales each day (all customers take credit). What is the company's average accounts receivable? Assume a 365-day year. Round your answer to the nearest dollar.
Cook Security Systems has a $37,500 line of credit, which charges an annual percentage rate of prime rate plus 4%. The starting balance on October 1 was $9,100. On October 4 they made a payment of $1,400. On October 13 the business borrowed $2,900, and on October 19 they borrowed $4,200. If the current prime rate is 8%, what is the new balance (in $)? (Round your answer to the nearest cent.) $
Fedex Ltd is a manufacturer that makes all sales on a 30-day credit terms. Annual sales are approximately $65 million. At the end of 2014 accounts receivable were presented in the company’s Balance Sheet as below: Accounts Receivable $5,350,000 Less: Allowance for Doubtful accounts $90,000 During 2015, $740,000 in accounts receivable were written off as uncollectible. Of these amounts written off, receivables totalling $34,000 were unexpectedly collected. At the end of 2015, an ageing of accounts receivable indicated a need for an $80,000 allowance to cover possible failure to collect the accounts currently outstanding. Fedex Ltd makes adjusting entries in its accounting records only at year-end. Required: Explain the difference between making an allowance for bad debts and writing off bad debt. Explain how each case is treated and shown in accounting. Prepare one journal entry to summarize…
Ascenda Corp. distributes the "Smart" brand of electronic controller systems. The company currently has a credit policy of 1/10, net 40, though an average only 20% of the customers pay in 10 days and take the discount, while another 30% pay on avorage in 15 days yet still take the unearned discount. The company's remaining customers pay on average in 50 days. Bad debt losses are 3% of sales. The company's sales are currently $600,000 per month, all on credit. Ascenda is thinking of restructuring its credit and collections department, with the goal of eliminating all unearned discounts and reducing bad debt losses to 1.5%. With this new policy, the company believes that sales will fall by 5% and 40% of the customers will pay in 10 days and obtain the discount, and that the remaining customers will pay in 40 days. Ascenda's variable costs are 60% of sales, its monthly collections department expense is expected to rise by $6,000 to $20,000, and its opportunity cost on funds is 12%…
ABC & Company is making sales of Rs.16,00,000 and it extends a credit of 90 days to its customers. However, in order to overcome the financial difficulties, it is considering to change the credit policy. The proposed terms of credit and expected sales are given here under: Policy Terms Sales 1 75 days Rs.15,00,000 II 60 days Rs. 14,50,000 III 45 days Rs 14,25,000 IV 30 days Rs 13,50,000 V 15 days Rs.13,00,000 The firm has variable cost of 80% and fixed cost of Rs.1,00,000. The cost of capital is 15%. Evaluate different policies and which policy should be adopted?
McGriff Dog Food Company normally takes 30 days to pay for average daily credit purchases of $9,730. Its average daily sales are $10,010, and it collects accounts in 32 days. a. What is its net credit position? Net credit position b-1. If the firm extends its average payment period from 30 days to 37 days (and all else remains the same), what is the firm's new net credit position? (Negative amount should be indicated by a minus sign.) Net credit position b-2. Has the firm improved its cash flow? Yes No
vv. Axis Wells and Excavation(AWE) currently generates 55,000 in annual sales. AWE sells on terms of net 50, and it’s accounts receivable balance averages $11,000. AWE is considering a new credit policy with terms of net 25. Under the new policy, sales will decrease to 36,000, and accounts receivable will average 12,000. Compute the days sales outstanding (DSO) under the existing policy and the proposed policy. Assume there are 360 days ina a year. Round your answer to the nearest whole number. DSO existing: Days DSO new: Days
ngram Office Supplies, Inc., buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $675,000 per year. On average, what is the dollar amount of costly trade credit (total credit – free credit) the firm receives during the year? (Assume a 365-day year, and note that purchases are net of discounts.) Do not round intermediate calculations. $56,959 $64,726 $78,318 $59,548 $53,723

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS