(B) Receivables: Credit Terms: ABC sold boxes of candles at P1,000 each. Each box costs P750. Daily sales total 500 boxes over its 250-work day year. All sales are on credit. For the coming year, it plans to accept customers who have less desirable credit ratings. Sales are expected to increase by 10%. Average collection period will increase from 40 days to 50 days. Bad debts will increase from 1% to 3% of sales. Operating expenses will stay the same. For profitability analysis, ABC uses an 8% effective interest rate. Compute for the required by filling up the supporting table. Required: How much would the following be assuming that ABC proceeds with its plan to accept the new market group? 7. Increase in gross profit Increase in receivables carrying cost 9. Increase in bad debts 8. 10. Net advantage or disadvantage of the plan
(B) Receivables: Credit Terms: ABC sold boxes of candles at P1,000 each. Each box costs P750. Daily sales total 500 boxes over its 250-work day year. All sales are on credit. For the coming year, it plans to accept customers who have less desirable credit ratings. Sales are expected to increase by 10%. Average collection period will increase from 40 days to 50 days. Bad debts will increase from 1% to 3% of sales. Operating expenses will stay the same. For profitability analysis, ABC uses an 8% effective interest rate. Compute for the required by filling up the supporting table. Required: How much would the following be assuming that ABC proceeds with its plan to accept the new market group? 7. Increase in gross profit Increase in receivables carrying cost 9. Increase in bad debts 8. 10. Net advantage or disadvantage of the plan
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question
Solve no. 10
Transcribed Image Text:(B) Receivables: Credit Terms: ABC sold boxes of candles at P1,000 each. Each box costs P750. Daily sales total 500 boxes over
its 250-work day year. All sales are on credit. For the coming year, it plans to accept customers who have less desirable
credit ratings. Sales are expected to increase by 10%. Average collection period will increase from 40 days to 50 days. Bad
debts will increase from 1% to 3% of sales. Operating expenses will stay the same. For profitability analysis, ABC uses an 8%
effective interest rate. Compute for the required by filling up the supporting table.
Required: How much would the following be assuming that ABC proceeds with its plan to accept the new market group?
Increase in gross profit
Increase in receivables carrying cost
Increase in bad debts
7.
8.
9.
10. Net advantage or disadvantage of the plan
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
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.Recommended textbooks for you
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,
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