58. ABC Company plans to tighten its credit policy. The new policy will decreasethe average number of days in collection from 75 to 50 days and will reduce theratio of credit sales to total revenue from 70% to 60%. The company estimatesthat projected sales will be 5% less if the proposed new credit policy isimplemented. If projected sales for the coming years are P100 million, what is thepeso impact on accounts receivable of this proposed change in credit policy?Assume a 360-day year.a. 3,333,334 decreaseb. 3,666,667 decreasec. 6,366,667 decreaseO d. 6,666,667 decrease 59. ABC Company currently has annual sales of P 20 million. Its averagecollection period is 40 days. Bad debts are 5 percent of sales. The credit andcollection manager is considering instituting a stricter collection policy wherebybad debts would be reduce to 2 percent of total sales, and the average collectionperiod would fall to 30 days. However, sales would also fall by an estimatedP2,500,000 annually. Variable cost are 60 percent of sales and the cost ofcarrying receivable is 12 percent. Assume a tax rate of 40 percent and 360 daysper year. What would be the change in profits if the company tightens its creditpolicy?a. 142,000 decreaseb. 155,000 decreasec. 156,000 increased. 162,000 increase

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58. ABC Company plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and will reduce the ratio of credit sales to total revenue from 70% to 60%. The company estimates that projected sales will be 5% less if the proposed new credit policy is implemented. If projected sales for the coming years are P100 million, what is the peso impact on accounts receivable of this proposed change in credit policy? Assume a 360-day year. a. 3,333,334 decrease b. 3,666,667 decrease c. 6,366,667 decrease O d. 6,666,667 decrease

58. ABC Company plans to tighten its credit policy. The new policy will decrease the average number of days in collection from 75 to 50 days and will reduce the ratio of credit sales to total revenue from 70% to 60%. The company estimates that projected sales will be 5% less if the proposed new credit policy is implemented. If projected sales for the coming years are P100 million, what is the peso impact on accounts receivable of this proposed change in credit policy? Assume a 360-day year. a. 3,333,334 decrease b. 3,666,667 decrease c. 6,366,667 decrease O d. 6,666,667 decrease

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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Wontaby Ltd. is extending its credit terms from 30 to 45 days. Sales are expected to increase from $4.90 million to $6.00 million as a result. Wontaby finances short-term assets at the bank at a cost of 10 percent annually. Calculate the additional annual financing cost of this change in credit terms. (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to the nearest whole dollar. Enter answer in whole dollar not in million.) Annual financing cost $
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