KK Corporation is analyzing its option to restrict its credit terms. Current sales level is P6,000,000, average receivables balance is P500,000, bad debts on sales is 10%. With the new policy, sales will be P5,000,000, average receivables balance will be P200,000, and bad debts on sales will be 2%. The variable cost rate is 60% and the effective cost of capital is 18%. Based on these available information, what is the net benefit/(cost) of this change in policy?
Q: XYZ Co had the following accounts at the time it was acquired by ABC Inc (see image below). ABC paid...
A: Cost of acquisition is a concept that includes all the costs at the time of purchase. It is net pric...
Q: On January 1, 2021, ABC Co. acquired all of the identifiable assets and assumed all of the liabiliti...
A: SOLUTION GOODWILL = PURCHASE PRICE OF TARGET COMPANY -(FAIR MARKET VALUE OF ASSETS - FAIR MARKET VAL...
Q: How does Declan's Designs' 2022 common stock issuance impact its 2022 Statement of Cash Flows? Qu...
A: >Statement of Cash flows is one of the financial statements, and is prepared for a particular per...
Q: What is Declan's Design's 2022 Cash Flows from Operating Activities? Question 23 options: Incr...
A: The cash flow statement is prepared to record the cash flow from various activities during the perio...
Q: The accounts of the partnership of A, B and C at the end of its fiscal year on October 31, 2018 are ...
A: The participants have the authority to determine how long the partnership will continue. Thus, if a ...
Q: How does Merchandise Inventory impact Declan's Designs' 2022 Statement of Cash Flows? Question 20...
A: The cash flow statement is one of the financial statements of the business which is prepared to reco...
Q: Use the following information for the next five questions:On January 1, 2021, ABC Co. acquired all o...
A: Answer: Fair value of consideration = Total equity capital and premium after combination - Equity ca...
Q: ny had a profit of 450,00. 1. Assuming that there are three partners that agreed to share equally , ...
A: Solution: Profits are shares based on the profit sharing ratio. When profits are agreed to be shared...
Q: Johnstone Controls had the following situations on December 2021. On March 31, 2021, the company le...
A: Journal entries are being used to record financial transactions. You create a journal entry by enter...
Q: Analyse on the variance between the planned and actual nett profit contribution of all the projects ...
A: Here asking about the total project details of different project which was actual value which are in...
Q: Conts XYZ Company prepares monthly interim financial statements. The company needs to estimate the m...
A:
Q: Preparation of Closing Entries and a Statement of Earnings Clayoquot Boat Repair Ltd. has entered a...
A: A journal entry is a form of accounting entry that is used to report a business transaction in a com...
Q: After preparing and posting the closing entries for revenues and expenses, the income summary accoun...
A: Closing entries are made every year in order to ascertain the results. For a manufacturing concern...
Q: if we produce goods over the capacity, should we consider the fixed marketing cost and variable mark...
A: Fixed marketing costs is fixed costs related with the marketing of the product and this will not be ...
Q: 1 of 1 GE1715 SAMPLE PROBLEMS ON FINANCIAL RATIOS 1. The management of International Heal Medical Co...
A: Return on assets is one of the profitability ratio which helps in analysing how much operating incom...
Q: Марlе llion, capital assets of $1,126.7 million, and other assets totalling $ llion. Current liabili...
A: Accounting equation refers to the equation which states the assets, owners equity and the liabilitie...
Q: For each separate case, record the necessary adjusting entry. a. On July 1, Lopez Company paid $3,00...
A: Increase in assets should be debited and decrease in assets should be credited. Increase in expenses...
Q: Question 14 Which of the following would be an example of vouching? 1. Making sure a sale is include...
A: Audit: It implies to the detailed investigation and analysis of company's financial records to make ...
Q: Statement of Earnings, Statement of Retained Earnings, and Statement of Financial Position McDonald...
A: The income statement, along with the balance sheet and the statement of cash flows, is one of three ...
Q: a. Calculate the unit cost for each product using the appropriate cost drivers for each product. Not...
A: Solution Note : As per the Q&A guideline we are required to answer the first three subparts only...
Q: Failure to provide any level of care in fulfilling a duty owed to another party, including reckless ...
A: Constructive fraud occurs when you falsify or omit vital facts when speaking with somebody who belie...
Q: Entity A owns 25% of the voting rights in Entity B. However, Entity A has no representation on the b...
A: The meaning of significant influence has been defined under IAS 28, if an entity holds 20% or more v...
Q: The two-column journal a.contains a debit and a credit column for recording the amounts for each tra...
A: Lets understand the basics. The two column journal is a journal which is having debit and credit sid...
Q: August 1 8 $140 $ 1,120 August 4 August 11 August 13 August 20 August 26 August 29 inventory Sale ($...
A: Inventory Valuation Methods are methods of valuation of inventory. There are three methods of invent...
Q: If you receive your full bonus at the end of the year, what is your total (gross or before tax) pay ...
A: Taxable income refers to the amount to which tax is imposed. It is arrived at after allowing certain...
Q: Consider the unadjusted trial balance of RiverdaleCompany at June 30, 2016, and the related month-en...
A: To begin, keeping accurate records of your transactions aids in the organization of your business's ...
Q: Pablo Management has six employees, each of whom earns $150 per day. They are paid on Fridays for wo...
A: To keep track of financial transactions, journal entries are used. You enter transaction details int...
Q: Prepare BALANCE SHEET
A: Balance sheet is a statement on financial position of an business enterprises. It is called a balanc...
Q: An interest-bearing note for 118 days at 6.4% p.a. simple interest has a face value of $4053. If the...
A: An interest bearing note is a loan from the lender to the borrower on which interest is accrued and ...
Q: Which sections of an annual report do IFRSs apply to? a) Management report b) Financial statements c...
A: management report is used as a means of communicating whatever information that is essential to be c...
Q: ournalizing Transactions Monilast Chemicals engaged in the following transactions during December 2...
A: In this question, we have to record transactions in the journal which helps us in financial statemen...
Q: In the income statement for the quarter ended September 30, 2014, what amount of casualty loss shoul...
A: Loss is the amount which is incurred by the company during the year or during the period which means...
Q: Financial Accounting I QUESTION TWO The John trading company has undertaken the following transac...
A: The cash book with three column is prepared to record the cash, bank and discount at one olace.
Q: n 2014 Janice Martin fulfilled a life-long dream and moved her home-based cottage baking business to...
A: The contribution margin is excess of selling price over variable cost. While analyzing the decision ...
Q: Lloyd’s Auto Specialist Ltd. journal entry for August 2021 Date Details DR CR 1-Aug Cash 150,000 ...
A: An income statement is a financial report that indicates the revenue and expenses of a business. It ...
Q: XYZ Co had the following accounts at the time it was acquired by ABC Inc (see image below). ABC paid...
A: Cost of acquisition means total expenses incurred by entity to purchase other entity or assets.
Q: The following information is departmental cost allocation with two service departments and two produ...
A: >Service department cost is allocated to production departments using various methods like: #...
Q: Black pens produces 12,000 units of gel pen T50 annually at a total cost of 270,000 Direct materials...
A: Relevant costs: =Direct materials+Labor cost+Variable overheads +avoidable fixed overheads +Revenue ...
Q: Income statement information for Einsworth Corporation follows: Sales $280,000 Cost of goods sold 86...
A: The vertical analysis is a part of the comparative analysis. This analysis helps to analyze the perf...
Q: Question 11 James Electronics is interested in purchasing Dyner Corp. Prior to the purchase James hi...
A: Ans. An auditor while discharging his professional duties is expected to exercise highest standards ...
Q: Perpetual inventory using LIFO The following units of a particular item were available for sale d...
A: Last-in, first-out (LIFO) cost flow assumption - Under LIFO Method, Inventory purchased last is sold...
Q: In 2018, SoundSmart Company started its production, specialising in manufacturing motorcycle helmets...
A:
Q: Y Corporation has daily collections of 130,000 from a selected foreign customer group. The bank offe...
A: Solution Given Amount 130000 Current clearing time 8 days Reduced clearing time 3 ...
Q: Choy, ufter recelving her degree in Hotel and Restaurant Management began her own business called Ch...
A: Accounting equation of the business says that total assets must be equal to total liabilities and eq...
Q: What is Declan's Designs' 2020 Cash Flows from Investing Activities? Question 26 options: Decre...
A: The cash flow from investing activities includes the cash flow from sale or purchase of fixed assets...
Q: The major supplier of SS Corp. offers credit terms of 2/10, n / 35 What is the net benefit (in rate ...
A: If the payment is made within 10 days the recipient will get a 2% discount and if the payment is mad...
Q: 2. Suppose by the end of November that the remaining inventory is estimated to have a net realizable...
A: Adjustment entries are those journal entries which are recorded in order to correct the account bala...
Q: 1. The initial cost of a paint sand mill, including its installation is P 700,000.00. The BIR approv...
A: Hi student Since there are multiple questions, we will answer only first question.
Q: Following are accounts and year-end adjusted balances of Cruz Company as of December 31. Number Acco...
A: Owner's capital account is increased by the net income and new investment and decreased by net loss ...
Q: Problem 6-9B Record transactions and prepare a partial income statement using a periodic inventory s...
A: >The inventory transactions are recorded either using a perpetual method or periodic method. ...
KK Corporation is analyzing its option to restrict its credit terms. Current sales level is P6,000,000, average receivables balance is P500,000,
Step by step
Solved in 2 steps
- KK Corporation is analyzing its option to restrict its credit terms. Current sales level is P6,000,000, average receivables balance is P500,000, bad debts on sales is 10%. With the new policy, sales will be P5,000,000, average receivables balance will be P200,000, and bad debts on sales will be 2%. The variable cost rate is 60% and the effective cost of capital is 18%. 3ased on these available information, what is the net benefit/(cost) of this change in policy? BUTEJJ Corporation is analyzing its option to restrict its credit terms. Current sales level is P6,000,000, average receivables balance is P500,000, bad debts on sales is 10%. With the new policy, sales will be P5,000,000, average receivables balance will be P200,000, and bad debts on sales will be 2% The variable cost rate is 60% and the effective cost of capital is 13%. Based on these available information, what is the net benefit/(cost) of ihis change in policy?ABC & Company is making sales of Rs.16,00,000 and it extends a credit of 90 days to it's customers. However, in order to overcome the financial difficulties, it is considering to change the credit policy. 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? The proposed terms of credit and expected sales are given hereunder: Policy I II III Terms 75 days 60 days 45 days Sales Rs.15,00,000 Rs. 14,50,000 Rs 14,25,000
- The sales director of ABC Corp suggest the following credit terms. He estimated the following:Sales will increase by at least 20%AR turnover will be reduced to 8 times from present turnover of 10 times.Bad debts will increase to 1.5%. Current bad debts are 1%.Current sales is P 900,000Variable cost ratio is 55%.Desired rate of return is 20%Fixed expenses is P 150,000What is the net advantage of changing the credit terms?Serfd Limited is considering a change in credit policy which is expected to increase sales revenue from $240,000 to $356,000 and increase accounts receivable from $20,000 to $89,000 with all other working capital items unaffected. The contribution margin ratio is 30% and Serfd Limited requires a return of 13% on all investments in working capital. What is the minimum expected increase in profit necessary to justify the change in credit policy?ABC & Company is making sales of Rs.16,00,000 and it extends a credit of 90 days to it's customers. However, in order to overcome the financial difficulties, it is considering to change the credit policy. 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?
- Tara’s Textiles currently has credit sales of $360 million per year and an average collection period of 60 days. Assume that the price of Tara’s products is $60 per unit and that the variable costs are $55 per unit. The firm is considering an accounts receivable change that will result in a 20% increase in sales and a 20% increase in the average collection period. No change in bad debts is expected. The firm’s equal-risk opportunity cost on its investment in accounts receivable is 14%. (Note: Use a 365-day year.) Calculate the additional profit contribution from sales that the firm will realize if it makes the proposed change. What marginal investment in accounts receivable will result? Calculate the cost of the marginal investment in accounts receivable. Should the firm implement the proposed change? What other information would be helpful in your analysis?A firm is evaluating an Accounts Receivable Change that would increase Bad Debts from 2% to 4% of Sales. Sales are currently 50,000 units, the selling price is $20 per unit, and the Variable Cost per unit is $15. As a result of the proposed change, sales are forecast to increase to 60,000 units. D. Ignoring the Additional Profit Contribution from increased sales, if the proposed change saves $3,500 and causes no change in the Average Investment in Accounts Receivable, would you recommend it? (Format: Yes or No) E. Considering all changes in Costs and Benefits, would you recommend the proposed change? (Format: Yes or No)Zed’s Textiles currently has Credit Sales of $360 million per year and an Average Collection Period of 60 days. Assume that the price of Zed’s products is $60 per unit and that the Variable Costs are $55 per unit. The firm is considering accounts receivable changes that will result in a 20% increase in sales and a 20% increase in the Average Collection Period. No change in Bad Debts is expected. The firm’s equal-risk Opportunity Cost on its investment in Accounts Receivable is 14%. (Note: Use a 365-day year) A. Calculate the Additional Profit Contribution from sales that the firm will realize if it makes the proposed change. (Format: 1,111,111) B. What Marginal Investment in Accounts Receivable will result? (Format: 1,111,111) C. Calculate the Cost of the Marginal Investment in Accounts Receivable. (Format: 1,111,111)
- Sunny Manufacturing is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $220,000 if credit is extended to these new customers. Of the new accounts receivable generated, 10 percent will prove to be uncollectible. Additional collection costs will be 5 percent of sales, and production and selling costs will be 70 percent of sales. a. Compute the incremental income before taxes. $ Incremental income before taxes b. What will the firm's incremental return on sales be if these new credit customers are accepted? (Round the final answer to 2 decimal place.) Incremental return on sales % c. If the receivable turnover ratio is 4 to 1, and no other asset buildup is needed to serve the new customers, what will Sunny Manufacturing's incremental return on new average investment be? (Do round intermediate calculations. Round the final answer to the nearest whole percentage.) Incremental return on new average investment %ABC Corporation is deciding whether to change the credit term from 1/15, n/60 to 2/10, n/40 to speed up cash collections. Its original forecasted sales and average age of receivables are P7,000,000 and 63 days. With the new credit term, sales would decrease by 5% but the average age of receivables will be 42 days. ABC's variable cost rate is 55% while its weighted average cost of capital is 17%. How much is the benefit from the change in average receivable balance?Kelly expects its sales to be $20 million this year under its current credit policy. The present terms are net 30; the days dales outstanding (DSO) is 65 days; and the bad debt loss percentage is 4%. Also, Kelly’s cost of capital is 14%, and its variable costs total 62% of sales. Since Kelly wants to improve its profitability, a proposal has been made to offer a 2 percent discount for payment within 10 days; that is, change the credit terms to 2/10, net 30. It is predicted that sales would increase by $600,000, and that 55 percent of all customers would take the discount. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 2 percent. (Hint, use incremental approach table) What are the incremental pre-tax profits from this proposal?