FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Related questions
Question
thumb_up100%
Cash & Credit Supermarket Inc. currently asks its credit customers to pay by the end of the month after the month of delivery. In practice, customers take rather longer to pay – on average 70 days. Sales revenue amounts to ₱ 8 million a year and
How much is the net cost/benefit of the proposed policy?Required to answer. Single choice.
(Ignore income taxes in this problem.) The Jason Company is considering the purchase of a machine that will increase revenues by P32,000 each year.
For this machine, the simple
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by stepSolved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Microbiotics currently sells all of its frozen dinners cash-on-delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $190, and the cost per carton is $110. The unit sales will increase from 1,140 cartons to 1,200 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered. a. If the interest rate is 1% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Change in total monthly profit: ____ b. If the interest rate is 1.5% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.) Change in…arrow_forwardTaylor Company provides the following information: Annual credit sales : $ 24,000,000Collection period : 3 monthsTerms : net/30Rate of return : 18% The company is considering changing the credit discount policy to 4/10, net 30. The company anticipates that thirty percent of consumers will take the discount. The receivable collection period is expected to be reduced to 2 months. Should the discount policy be implemented? Explain with calculations.arrow_forwardPeanut Inc. is evaluating whether to change its credit terms from 2/10 net 30 to 3/10 net 30. At present, 50% of Peanut's sales are paid at day 10. Regardless of the credit terms, half of the customers who do not take the discount are expected to pay on day 30 whereas the remainder will pay 15 days late (no bad debts exist). But as a result of the higher cash discount offered with the new terms, sales are expected to increase from 757,000 to 801,000 per year. Peanut's variable cost ratio is 75% and its cost of funds is 8.7%. All production costs are paid on the day of the sale. Should the change be made?arrow_forward
- Warren Motor Company sells $30 million of its products to wholesalers on terms of "net 30." Currently, the firm's average collection period is 48 days. In an effort to speed up the collection of receivables, Warren is considering offering a cash discount of 2 percent if customers pay their bills within 10 days. The firm expects 50 percent of it's customers to take the discount and it's average collection period to decline to 30 days. The firm's required pretax return (i.e. opportunity cost) on receivables investment is 16 percent. Determine the cost of the cash discounts to Warren. a. $300,000 b. $ 60,000 c. $ 40,000 d. $48,000arrow_forwardBird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by 1.5 days. Assume 365 days a year. Average number of payments per day Average value of payment Variable lockbox fee (per transaction) Annual interest rate on money market securities 880 $830 $.10 3.2% a. What is the NPV of the new lockbox system? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose in addition to the variable charge that there is an annual fixed charge of $3,000 to be paid at the end of each year. What is the NPV now? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely…arrow_forwardPlease provide answer in text (Without image)arrow_forward
- Axis Wells and Excavation (AWE) currently generates $198,000 in annual credit sales. AWE sells on terms of net 50, and its 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 $189,000, and accounts receivable will average $12,600. Compute the days sales outstanding (DSO) under the existing policy and the proposed policy. Assume there are 360 days in a year. Round your answers to the nearest whole number. DSOExisting: days DSONew: daysarrow_forwardPlease helparrow_forwardnider Industries sells on terms of 2/10, net 25. Total sales for the year are $600,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 30 days after their purchases. Assume a 365-day year. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number. 24 days What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would happen to average receivables if Snider toughened its collection policy with the result that all non-discount customers paid on the 25th day? Do not round intermediate calculations. Round your answer to the nearest dollar.arrow_forward
- Axis Wells and Excavation (AWE) currently generates $110,000 in annual credit sales. AWE sells on terms of net 50, and its 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 $104,000, and accounts receivable will average $13,000. Compute the days sales outstanding (DSO) under the existing policy and the proposed policy. Assume there are 360 days in a year. Round your answers to the nearest whole number. DSO Existing: days DSO New: daysarrow_forwardMicrobiotics currently sells all of its frozen dinners cash-on-delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $170, and the cost per carton is $100. The unit sales will increase from 1,120 cartons to 1,180 per month if credit is granted. Assume all customers pay their bills and take full advantage of any credit period offered. a. If the interest rate is 1% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. If the interest rate is 1.5% per month, what will be the change in the firm's total monthly profits on a present value basis if credit is offered to all customers? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. c. Assume the interest rate is 1.5% per month…arrow_forwardCompany is considering to establish a line of credit with a local bank to make up for the cash deficit for the next three months. The company expects a 60% chance for a $240,938 deficit and a 40% chance for no deficit at all. The line of credit charges 0.59% of interest rate per month on the amount borrowed plus a commitment fee of $2,500 for a quarter. It also requires a 7% compensation balance for outstanding loans. The company can reinvest any excess cash at an annual rate of 8%. What will the expected cost of establishing a line of credit be? Round your answer to the nearest dollar. (Hint: Refer to a numerical example in short-term financing choices.) Group of answer choices: $5,255 $5,240 $5,251 $5,260 $5,246arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
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