In order to expand its sales and keep up with the competition, ABC has decided to extend the terms of its trade credit. Currently, the terms for all credit buyers are "net 10" which means that customers have to pay the bill within 10 days of the invoice date. They intend to expand the level of credit to their customers to "net 25" which means that the credit customers will have to pay within 25 days of receiving the invoice. This year's credit sales were $8,000,000. ABC thinks that its credit sales will increase to $8,242,000 next year following this change. Assuming that all credit customers pay according to the credit terms, how much will ABC's accounts receivable change as a result of the new credit terms?
In order to expand its sales and keep up with the competition, ABC has decided to extend the terms of its trade credit. Currently, the terms for all credit buyers are "net 10" which means that customers have to pay the bill within 10 days of the invoice date. They intend to expand the level of credit to their customers to "net 25" which means that the credit customers will have to pay within 25 days of receiving the invoice. This year's credit sales were $8,000,000. ABC thinks that its credit sales will increase to $8,242,000 next year following this change. Assuming that all credit customers pay according to the credit terms, how much will ABC's accounts receivable change as a result of the new credit terms?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In order to expand its sales and keep up with the competition, ABC has decided to extend the terms of its trade credit. Currently, the terms for all credit buyers are "net 10" which means that customers have to pay the bill within 10 days of the invoice date. They intend to expand the level of credit to their customers to "net 25" which means that the credit customers will have to pay within 25 days of receiving the invoice. This year's credit sales were $8,000,000. ABC thinks that its credit sales will increase to $8,242,000 next year following this change. Assuming that all credit customers pay according to the credit terms, how much will ABC's accounts receivable change as a result of the new credit terms?
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