All Related Questions of Credit Terms

Q: Jane Geddes Engineering Corporation purchased conveyor equipment with a list price of

Jane Geddes Engineering Corporation purchased conveyor equipment with a list price of $10,000. Presented below are three independent cases related to the equipment. (a) Geddes paid cash for the equ...

Q: Cruise Industries purchased $10,800 of merchandise on February 1

Cruise Industries purchased $10,800 of merchandise on February 1, 2014, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,500 (gross price before trade or cash d...

Q: Edna Millay Inc. is a manufacturer of electronic components and accessories

Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size a...

Q: The Arizona Bay Corporation sells on credit terms of net 30.

The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, 6 days past due. If annual credit sales are $9.3 million, what is the company’s balance sheet amount in accou...

Q: Air Spares is a wholesaler that stocks engine components and test equipment

Air Spares is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increa...

Q: Kyoto Joe, Inc., sells earnings forecasts for Japanese securities.

Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2/15, net 30. Based on experience, 65 percent of all customers will take the discount. a. What is the average co...

Q: From its first day of operations to December 31, 2014,

From its first day of operations to December 31, 2014, Campbell Corporation provided for uncollectible accounts receivable under the allowance method: entries for bad debt expense were made monthly ba...

Q: Boyko Company received an order from Lister Inc. on May 15

Boyko Company received an order from Lister Inc. on May 15, 2014, valued at 52,200. Boyko shipped the goods to Lister on May 31, 2014, with terms f.o.b. shipping point, and credit terms 2/10, n/30. As...

Q: Donna Jamison, a 2003 graduate of the University of Florida with

Donna Jamison, a 2003 graduate of the University of Florida with 4 years of banking experience, was recently brought in as assistant to the chairperson of the board of D’Leon Inc., a...

Q: Dan Barnes, financial manager of Ski Equipment Inc. (SKI

Dan Barnes, financial manager of Ski Equipment Inc. (SKI), is excited, but apprehensive. The company’s founder recently sold his 51% controlling block of stock to Kent Koren, who is...

Q: Lamar Lumber Company has sales of $10 million per year,

Lamar Lumber Company has sales of $10 million per year, all on credit terms calling for payment within 30 days; and its accounts receivable are $2 million. What is Lamar’s DSO, what would it be if all...

Q: Assume the credit terms offered to your firm by your suppliers are

Assume the credit terms offered to your firm by your suppliers are 3/5, net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30.

Q: Connors Corporation acquired manufacturing equipment for use in its assembly line.

Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. 1. The equipment was purchased on...

Q: Toot Auto Supply distributes new and used automobile parts to local dealers

Toot Auto Supply distributes new and used automobile parts to local dealers throughout the Midwest. Toot’s credit terms are n/30. As of the end of business on October 31, the followi...

Q: Toot Auto Supply distributes new and used automobile parts to local dealers

Toot Auto Supply distributes new and used automobile parts to local dealers throughout the Midwest. Toot’s credit terms are n/30. As of the end of business on October 31, the followi...

Q: The study and evaluation of management risk mitigation control is not easy

The study and evaluation of management risk mitigation control is not easy. First, auditors must determine the risks and the controls subject to audit. Then they must find a standard by which performa...

Q: A company sells on credit terms of “2/10,

A company sells on credit terms of “2/10, n/30” and has days’ sales in account receivableof 30 days. Its days’ sales in receivables is a. Too low. b. Too high. c. About right. d. Not able to be evalua...

Q: Answer these questions about receivables and uncollectibles. For the true-

Answer these questions about receivables and uncollectibles. For the true-false questions, explain any answers that turn out to be false. 1. True or false? Credit sales increase receivables. Collectio...

Q: Lakeland Clothiers reported the following amounts in its 2013 financial statements.

Lakeland Clothiers reported the following amounts in its 2013 financial statements. The 2012 amounts are given for comparison. Requirements 1. Compute Lakeland’s quick (acid-test)...

Q: Dome Metals has credit sales of $144,000 yearly with

Dome Metals has credit sales of $144,000 yearly with credit terms of net 30 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take t...

Q: Mr. Paul Promptly is a very cautious businessman. His supplier

Mr. Paul Promptly is a very cautious businessman. His supplier offers trade credit terms of 3/10, net 70. Mr. Promptly never takes the discount offered, but he pays his suppliers in 60 days rather tha...

Q: What purpose does a discount on credit terms serve? What is

What purpose does a discount on credit terms serve? What is the cost of such a discount to the offering firm?

Q: The partial income statement of the Lund Manufacturing Company, a Swedish

The partial income statement of the Lund Manufacturing Company, a Swedish-based concern producing pharmaceutical products, is presented below: During the year, short-term interest rates in Sweden aver...

Q: The following data were selected from the records of Sharkim Company for

The following data were selected from the records of Sharkim Company for the year ended December 31, 2012. Balances January 1, 2012: Accounts receivable (various customers).......................$116...

Q: The following data were selected from the records of Sykes Company for

The following data were selected from the records of Sykes Company for the year ended December 31, 2011. Balances January 1, 2011 Accounts receivable (various customers).................................

Q: Use the data presented in P6-2, which were selected

Use the data presented in P6-2, which were selected from the records of Sykes Company for the year ended December 31, 2011. Data from P6-2: The following data were selected from the records of Sykes...

Q: Brett’s Cycles sells merchandise on credit terms of 2/15,

Brett’s Cycles sells merchandise on credit terms of 2/15, n/30. A sale invoiced at $900 (cost of sales $600) was made to Shannon Allen on February 1, 2011. The company uses the gross method of recordi...

Q: Match the accounting terms with the corresponding definitions. /

Match the accounting terms with the corresponding definitions.

Q: Journalize the following sales transactions for Antique Mall. Explanations are not

Journalize the following sales transactions for Antique Mall. Explanations are not required. The company estimates sales returns at the end of each month.

Q: Journalize the following sales transactions for Morris Supply. Explanations are not

Journalize the following sales transactions for Morris Supply. Explanations are not required.

Q: Journalize the following sales transactions for Straight Shot Archery using the periodic

Journalize the following sales transactions for Straight Shot Archery using the periodic inventory system. Explanations are not required. The company estimates sales returns and allowances at the end...

Q: What would the credit terms of “2/10, n

What would the credit terms of “2/10, n/EOM” mean?

Q: Journalize the following sales transactions for Sanborn Camera Store using the periodicinventory

Journalize the following sales transactions for Sanborn Camera Store using the periodicinventory system. Explanations are not required.

Q: Consider the following transactions for Toys and More: /

Consider the following transactions for Toys and More: Requirements: 1. Journalize the purchase transactions. Explanations are not required. 2. In the final analysis, how much did the inventory cost...

Q: Consider the following transactions for Burlington Drug Store: /

Consider the following transactions for Burlington Drug Store: Requirements: 1. Journalize the purchase transactions. Explanations are not required. 2. In the final analysis, how much did the invent...

Q: Journalize the following sales transactions for Salem Sportswear. Explanations are not

Journalize the following sales transactions for Salem Sportswear. Explanations are not required. The company estimates sales returns at the end of each month.

Q: Consider the following transactions for Garman Packing Supplies: /

Consider the following transactions for Garman Packing Supplies: Requirements: 1. Journalize the purchase transactions assuming Garman Packing Supplies uses the periodic inventory system. Explanatio...

Q: Unique Media Sign Incorporated sells on account. Recently, Unique reported

Unique Media Sign Incorporated sells on account. Recently, Unique reported the following figures: Requirements: 1. Compute Unique’s days’ sales in receivables for...

Q: Abanaki Carpets reported the following amounts in its 2018 financial statements.

Abanaki Carpets reported the following amounts in its 2018 financial statements. The 2017 figures are given for comparison. Requirements: 1. Calculate Abanaki’s acid-test ratio for...

Q: Rob Peterson works as a salesperson at Consolidated Systems, Inc.

Rob Peterson works as a salesperson at Consolidated Systems, Inc. In addition to a base monthly salary, Rob receives a commission based on the amount of sales that he makes during the month. Rob was h...

Q: Suppose A-1 Sports purchases $83,000 of sportswear

Suppose A-1 Sports purchases $83,000 of sportswear on account from Outdoor Wear, Inc., on December 1, 2016. Credit terms are 2/10, net 45. A-1 Sports pays Outdoor Wear, Inc., on December 8, 2016. 1....

Q: Winter Corporation has just completed its comparative statements for the year ended

Winter Corporation has just completed its comparative statements for the year ended December 31, 2012. At this point, certain analytical and interpretive procedures are to be undertaken. The completed...

Q: The information for Mathis and Reece companies given below.

The information for Mathis and Reece companies given below. Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April: a. On A...

Q: Briggs Company purchased $15,000 of inventory on credit with

Briggs Company purchased $15,000 of inventory on credit with credit terms of 2/10, n/30. Briggs paid for the purchase within the discount period. How much did Briggs pay for the inventory? a. $14,700...

Q: Carolyn Furniture Galleries sells traditional furniture from two stores in St.

Carolyn Furniture Galleries sells traditional furniture from two stores in St. Louis. Carolyn’s credit terms allow customers to pay for purchases over 3 months with no finance charges. Carolyn’s accou...

Q: Look at the previous problem. Assume that the change in credit

Look at the previous problem. Assume that the change in credit terms results in a 2% increase in sales. Recalculate the effect of the changed credit terms. Previous problem: Until recently, Augean Cle...

Q: Phoenix Lambert currently sells its goods cash-on-delivery.

Phoenix Lambert currently sells its goods cash-on-delivery. However, the financial manager believes that by offering credit terms of 2/10 net 30 the company can increase sales by 4%, without significa...

Q: What is the nominal and effective cost of trade credit under the

What is the nominal and effective cost of trade credit under the credit terms of 3/15, net 30?

Q: Karen Johnson, CFO for Raucous Roasters (RR), a specialty

Karen Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her company’s working capital policy in light of a recent scare she faced when RRâ&...

Q: Kim Mitchell, the new credit manager of the Vinson Corporation,

Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on credit terms of net 90 days while industry-wide credit terms have recently been lowered to net...

Q: Rich Jackson, a recent finance graduate, is planning to go

Rich Jackson, a recent finance graduate, is planning to go into the wholesale building supply business with his brother, Jim, who majored in building construction. The firm would sell primarily to gen...

Q: Suppose a company’s current credit terms are 1/10, net

Suppose a company’s current credit terms are 1/10, net 30, but management is considering changing its terms to 2/10, net 40, relaxing its credit standards, and putting less pressure on slow-paying cus...

Q: How would each of the following factors affect ratio analysis?

How would each of the following factors affect ratio analysis? (a) The firm’s sales are highly seasonal. (b) The firm uses some type of window dressing. (c) The firm issues more debt and uses the p...

Q: A large retailer obtains merchandise under the credit terms of 1/

A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to s...

Q: A chain of appliance stores, APP Corporation, purchases inventory with

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under credit terms of 2/15, net 40. APP always takes the di...

Q: Melcher Company uses the calendar year. Sales are at a peak

Melcher Company uses the calendar year. Sales are at a peak during the holiday season, and T. Melcher Company extends 30-day credit terms to customers. Comment on the expected liquidity of its receiva...

Q: Excalibur, Inc., received an order for a piece of special

Excalibur, Inc., received an order for a piece of special machinery from Rex Company. J ust as Excalibur completed the machine, Rex Company declared bankruptcy, defaulted on the order, and forfeited t...

Q: The following data were selected from the records of Sharkim Company for

The following data were selected from the records of Sharkim Company for the year ended December 31, current year. Balances January 1, current year: Accounts receivable (various customers) $116,000 Al...

Q: Use the data presented in Problem 1, which were selected from

Use the data presented in Problem 1, which were selected from the records of Sykes Company for the year ended December 31, current year. Data from Problem 1: The following data were selected from the...

Q: Scott’s Cycles sells merchandise on credit terms of 2/15,

Scott’s Cycles sells merchandise on credit terms of 2/15, n/30. A sale invoiced at $1,500 (cost of sales $975) was made to Shannon Allen on February 1. The company uses the gross method of recording s...

Q: The following data were selected from the records of Sykes Company for

The following data were selected from the records of Sykes Company for the year ended December 31, current year. Balances January 1, current year Accounts receivable (various cust...

Q: You have recently been hired by Piepkorn Manufacturing to work in the

You have recently been hired by Piepkorn Manufacturing to work in the newly established treasury department. Piepkorn Manufacturing is a small company that produces cardboard boxes in a variety of siz...

Q: Best Buy, a national electronics retailer, offered a credit card

Best Buy, a national electronics retailer, offered a credit card that allowed users to earn “reward points” that could be redeemed for discounts on Best Buy goods. After reading a newspaper advertisem...

Q: In the right-hand column below, certain financial ratios are

In the right-hand column below, certain financial ratios are listed. To the left of each ratio is a business transaction or event relating to the operating activities of Delta Company (each transactio...

Q: Goods costing $1,900 are purchased on account on July

Goods costing $1,900 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, the purchaser receives a $300 credit from the supplier for damaged goods. Give the journal entry o...

Q: Godfreid Company has accounts receivable of $95,400 at March

Godfreid Company has accounts receivable of $95,400 at March 31, 2017. Credit terms are 2/10, n/30. At March 31, 2017, there is a $2,100 credit balance in Allowance for Doubtful Accounts prior to adju...

Q: On July 15, a company purchases on account goods costing $

On July 15, a company purchases on account goods costing $1,900, with credit terms of 2/10, n/30. On July 18, the company receives a $400 credit memo from the supplier for damaged goods. Give the jour...

Q: Wizard Industries purchased $12,000 of merchandise on February 1

Wizard Industries purchased $12,000 of merchandise on February 1, 2012, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $3,000 (gross price before trade or cash dis...

Q: Chopin Engineering Corporation purchased conveyor equipment with a list price of $

Chopin Engineering Corporation purchased conveyor equipment with a list price of $15,000. Presented below are three independent cases related to the equipment. (Round to nearest dollar.) (a) Chopin pa...

Q: From inception of operations to December 31, 2012, Fortner Corporation

From inception of operations to December 31, 2012, Fortner Corporation provided for uncollectible accounts receivable under the allowance method: provisions were made monthly at 2% of credit sales; ba...

Q: The following transactions were completed by Nelson’s Boutique, a retailer,

The following transactions were completed by Nelson’s Boutique, a retailer, during July. Terms of sales on account are 2/10, n/30, FOB shipping point. July 3 Received cash from J. Smith in payment of...

Q: The following transactions were completed by Nelson’s Hardware, a retailer,

The following transactions were completed by Nelson’s Hardware, a retailer, during September. Terms on sales on account are 1/10, n/30, FOB shipping point. Sept. 4 Received cash from M. Alex in paymen...

Q: Artero Corporation is a traditional toy products retailer that recently also started

Artero Corporation is a traditional toy products retailer that recently also started an Internet-based subsidiary that sells toys online. A markup is added on goods the company purchases from manufac...

Q: Howser Inc. is a manufacturer of electronic components and accessories with

Howser Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Howser and the industry averages for firms of similar size are pr...

Q: Explain the meaning of the credit terms 2/10, n

Explain the meaning of the credit terms 2/10, n/30.

Q: Goods costing $2,000 are purchased on account on July

Goods costing $2,000 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18 a $200 credit memo is received from the supplier for damaged goods. Give the journal entry on July...

Q: Alonzo Saunders owns a small training services company that is experiencing growing

Alonzo Saunders owns a small training services company that is experiencing growing pains. The company has grown rapidly by offering liberal credit terms to its customers. Although his competitors req...

Q: Expert Computers was started in 2018. The company experienced the following

Expert Computers was started in 2018. The company experienced the following accounting events during its first year of operation: 1. Started business when it acquired $40,000 cash from the issue of co...

Q: The consolidated cash flows from operations of Jones Corporation and its subsidiary

The consolidated cash flows from operations of Jones Corporation and its subsidiary Short Manufacturing for 20X2 decreased quite substantially from 20X1 despite the fact that consolidated net income i...

Q: Your sister operates Harbor Ready Parts Company, an online boat parts

Your sister operates Harbor Ready Parts Company, an online boat parts distributorship that is in its third year of operation. The income statement is shown below and was recently prepared for the year...

Q: The following transactions affecting the accounts receivable of Wonderland Corporation took place

The following transactions affecting the accounts receivable of Wonderland Corporation took place during the year ended January 31, 2013: Sales (cash and credit) . . . . . . . . . . . . . . . . . . ....

Q: Datarite, a maker of computer hardware systems, sells its products

Datarite, a maker of computer hardware systems, sells its products to dealers who in turn sell to the final customer. Datarite offers very liberal credit terms and allows its dealers to take up to 90...

Q: Many large electronics retailers offer very easy credit terms when a customer

Many large electronics retailers offer very easy credit terms when a customer purchases their products. For example, a company might offer its customers a “$0 down, no payments for 12 months” payment...

Q: Jill Land, president of Loon Co., is happy to report

Jill Land, president of Loon Co., is happy to report to the company’s stockholders that the company increased its cash position by 20% from last year. Its average collection period decreased by 12 day...

Q: Thad’s computer center’s business is picking up, so he has decided

Thad’s computer center’s business is picking up, so he has decided to expand his bookkeeping system to a general journal/ledger system. The balances from August hav...

Q: McCoy Warehouse distributes hardback books to retail stores and extends credit terms

McCoy Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. During the month of June, the following merchandising transactions occurred....

Q: Cosmotologist Warehouse distributes commercial hair care products in onegallon bottles to hair

Cosmotologist Warehouse distributes commercial hair care products in onegallon bottles to hair salons and extends credit terms of 3/10, n/30 to all of its customers. During the month of April, the fol...

Q: Powell’s Book Warehouse distributes hardcover books to retail stores and extends credit

Powell’s Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Powell’s inventory consisted of books purchased...

Q: Explain the meaning of the credit terms 2/10, n

Explain the meaning of the credit terms 2/10, n/30.

Q: Goods costing $2,000 are purchased on account on July

Goods costing $2,000 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, a $200 credit memo is received from the supplier for damaged goods. Give the journal entry on July...

Q: Goods costing $3,000 are purchased on account on July

Goods costing $3,000 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, a $200 credit was received from the supplier for damaged goods. Give the journal entry on July 24...

Q: A company sells on credit terms of net 30 days and has

A company sells on credit terms of net 30 days and has days’ sales in account receivable of 30 days. Its days sales in receivables is a. too high. b. too low. c. about right. d. cannot be evaluate...

Q: West Highland Clothiers reported the following amounts in its 2011 financial statements

West Highland Clothiers reported the following amounts in its 2011 financial statements. The 2010 amounts are given for comparison. Requirements 1. Compute West Highlands acid-test ratio at the end...

Q: The Arizona Bay Corporation sells on credit terms of net 30.

The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, 5 days past due. If annual credit sales are $8.95 million, what is the company’s balance sheet amount in acco...

Q: Air Spares is a wholesaler that stocks engine components and test equipment

Air Spares is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increa...

Q: Kyoto Joe, Inc., sells earnings forecasts for Japanese securities.

Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 1/15, net 30. Based on experience, 70 percent of all customers will take the discount. a. What is the average co...

Q: On August 1, Gilmore Company purchased merchandise from Hendren with an

On August 1, Gilmore Company purchased merchandise from Hendren with an invoice price of $60,000 and credit terms of 2/10, n/30. Gilmore Company paid Hendren on August 11. Prepare any required journal...

Q: On September 15, Krug Company purchased merchandise inventory from Makarov with

On September 15, Krug Company purchased merchandise inventory from Makarov with an invoice price of $35,000 and credit terms of 2/10, n/30. Krug Company paid Makarov on September 28. Prepare any req...

Q: In order to better serve their rural patients, Drs. Joe

In order to better serve their rural patients, Drs. Joe and Rick Parcells (brothers) began giving safety seminars. Especially popular were their “emergency-preparedness” talks given to f...

Q: In order to better serve their rural patients, Drs. Joe

In order to better serve their rural patients, Drs. Joe and Rick Parcells (brothers) began giving safety seminars. Especially popular were their “emergency-preparedness” talks given to f...

Q: The debits and credits for five related transactions, (1)

The debits and credits for five related transactions, (1) through (5), are presented in the following T accounts. Assume the credit terms were 2/10, n/30. a. Describe each transaction. b. What was t...

Q: The debits and credits from four related transactions, (1)

The debits and credits from four related transactions, (1) through (4), are presented in the following T accounts. Assume that the freight terms were FOB shipping point and that the credit terms were...

Q: Toot Auto Supply distributes new and used automobile parts to local dealers

Toot Auto Supply distributes new and used automobile parts to local dealers throughout the Midwest. Toot’s credit terms are n/30. As of the end of business on October 31, the followi...

Q: Caroline’s Candy Corner sells gourmet chocolates. The company buys chocolates in

Caroline’s Candy Corner sells gourmet chocolates. The company buys chocolates in bulk for $5 per pound plus 5% sales tax. Credit terms are 2/10, n/25, and the company always pays promptly to take adva...

Q: On January 1, 2017, Hillock Brewing Company sold 50,

On January 1, 2017, Hillock Brewing Company sold 50,000 bottles of beer to various customers for $45,000 using credit terms of 3/10, n/30. These credit terms mean that customers receive a cash discoun...

Q: Blue, Inc., sells playground equipment to schools and municipalities.

Blue, Inc., sells playground equipment to schools and municipalities. It mails invoices at the end of each month for all goods shipped during that month; credit terms are net 30 days. Sales and accoun...

Q: Compute the cost of the trade credit terms in Problem 15-

Compute the cost of the trade credit terms in Problem 15-3 using the compounding formula, or effective annual rate. Data from Problem 15-3: Historical data for the sales, accounts receivable, invento...

Q: The Michelin Warehousing and Transportation Company (WTC) needs $300

The Michelin Warehousing and Transportation Company (WTC) needs $300,000 to finance an anticipated expansion in receivables due to increased sales. WTC’s credit terms are net 60, and its average month...

Q: A factor has agreed to lend the JVC Corporation working capital on

A factor has agreed to lend the JVC Corporation working capital on the following terms: JVC’s receivables average $100,000 per month and have a 90-day average collection period. (Note that JVC’s credi...

Q: Calculate the effective cost of the following trade credit terms when payment

Calculate the effective cost of the following trade credit terms when payment is made on the net due date: a. 2/10, net 30 b. 3/15, net 30 c. 3/15, net 45 d. 2/15, net 60

Q: The following account balances are taken from the records of the Faraway

The following account balances are taken from the records of the Faraway Travel Agency: Faraway extends credit terms requiring full payment in 60 days, with no discount for early payment. Required:...

Q: Adair Corp. is concerned because the average time to collect its

Adair Corp. is concerned because the average time to collect its accounts receivable was 15 days longer than its normal credit terms of net 30. Adair reported the following in the Current Assets secti...

Q: Alonzo Saunders owns a small training services company that is experiencing growing

Alonzo Saunders owns a small training services company that is experiencing growing pains. The company has grown rapidly by offering liberal credit terms to its customers. Although his competitors req...

Q: What is the purpose of giving credit terms to customers?

What is the purpose of giving credit terms to customers?

Q: The Johnson Company sells 3,300 pairs of running shoes per

The Johnson Company sells 3,300 pairs of running shoes per month at a cash price of $90 per pair. The firm is considering a new policy that involves 30 days’ credit and an increase in price to $91.84...

Q: Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its

Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 210, net 30. Based on experience, 65 percent of all customers will take the discount.a. What is the average coll...

Q: The Arizona Bay Corporation sells on credit terms of net

The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, 8 days past due. If annual credit sales are $8.4 million, what is the company’s balance sheet amount in accou...

Q: Air Spares is a wholesaler that stocks engine components and

Air Spares is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increa...

Q: From inception of operations to December 31, 2017, Fortner Corporation

From inception of operations to December 31, 2017, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of cust...

Q: Cruise Industries purchased $10,800 of merchandise on February 1

Cruise Industries purchased $10,800 of merchandise on February 1, 2017, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,500 (gross price before trade or cash dis...

Q: Edna Millay Inc. is a manufacturer of electronic components and accessories

Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size a...

Q: A company increasing its credit terms for customers from 1/10

A company increasing its credit terms for customers from 1/10, net 30 to 1/10, net 60 will likely experience: a. An increase in cash on hand. b. An increase in the average collection period. c. Higher...

Q: How do the following circumstances affect the cash conversion cycle:

How do the following circumstances affect the cash conversion cycle: (a) favorable credit terms allow the firm to pay its accounts payable slower, (b) inventory turnover increases, (c) accounts receiv...

Q: A company sells on credit terms of 2/10, n

A company sells on credit terms of 2/10, n/30 and has days’ sales in accounts receivable of 31 days. Its days’ sales outstanding is a. about right. b. too high. c. too low. d. not able to be evalu...

Q: The balance sheet of Libra, Inc., a world leader in

The balance sheet of Libra, Inc., a world leader in the design and sale of telescopic equipment, reported the following information on its balance sheets for 2016 and 2015 (figures are...

Q: Highland Products reported the following amounts in its 2017 financial statements.

Highland Products reported the following amounts in its 2017 financial statements. The 2016 amounts are given for comparison. Requirements 1. Compute Highland’s qui...

Q: Answer these questions about receivables and uncollectibles. For the true-

Answer these questions about receivables and uncollectibles. For the true-false questions, explain any answers that turn out to be false. 1. True or false? Credit sales increase receivables. Collecti...

Q: Mr Norman is going to set up a new business in Singapore

Mr Norman is going to set up a new business in Singapore on 1 January 20X8. He will invest $150,000 in the business on that date and has made the following estimates and policy decisions: 1 Forecast s...

Q: Kern’s Book Warehouse distributes hardcover books to retail stores and extends credit

Kern’s Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Kern’s inventory consisted of books purchased for...

Q: Godfreid Company has accounts receivable of $95,400 at March

Godfreid Company has accounts receivable of $95,400 at March 31, 2020. Credit terms are 2/10, n/30. At March 31, 2020, there is a $2,100 credit balance in Allowance for Doubtful Accounts prior to adju...

Q: Ermler & Trump is a wholesaler of small appliances and parts.

Ermler & Trump is a wholesaler of small appliances and parts. Ermler & Trump is operated by two owners, Jack Ermler and Andrea Trump. In addition, the company has one employee, a repair specialist, wh...

Q: Abid and Company manufactures a variety of pumps and valves that it

Abid and Company manufactures a variety of pumps and valves that it distributes through several thousand plumbing supply houses as well as 100 manufacturer’s representatives. As a re...

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The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, five days past due. If annual credit sales are $8.35 million, what is the company’s balance sheet amount in a...

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Air Spares is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increa...

Q: Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its

Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2/10, net 30. Based on experience, 70 percent of all customers will take the discount.a. What is the average col...

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You have recently been hired by Piepkorn Manufacturing to work in the newly established treasury department. Piepkorn Manufacturing is a small company that produces cardboard boxes in a variety of siz...

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The Johnson Company sells 2,400 pairs of running shoes per month at a cash price of $99 per pair. The firm is considering a new policy that involves 30 days’ credit and an increase in price to $100 pe...

Q: The Arizona Bay Corporation sells on credit terms of net

The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, five days past due. If annual credit sales are $8.35 million, what is the company’s balance sheet amount in a...

Q: Air Spares is a wholesaler that stocks engine components and

Air Spares is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increa...

Q: Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its

Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2/10, net 30. Based on experience, 70 percent of all customers will take the discount.a. What is the average col...

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You have recently been hired by Piepkorn Manufacturing to work in the newly established treasury department. Piepkorn Manufacturing is a small company that produces cardboard boxes in a variety of siz...

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The Johnson Company sells 2,400 pairs of running shoes per month at a cash price of $99 per pair. The firm is considering a new policy that involves 30 days’ credit and an increase in price to $100 pe...

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Using T accounts for Cash, Accounts Payable, Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight-In, enter the following purchase transactions. Identify each transaction with...

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Merchandise was purchased on account from Grant’s Distributors on June 12. The purchase price was $5,000, less a 10% trade discount and credit terms of 3/10, n/30. 1. Calculate the net amount to recor...

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Using T accounts for Cash, Accounts Payable, Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight-In, enter the following purchase transactions. Identify each transaction with...

Q: Dome Metals has credit sales of $180,000 yearly with

Dome Metals has credit sales of $180,000 yearly with credit terms of net 60 days, which is also the average collection period. Dome does not offer a discount for early payment, so its customers take t...

Q: Dome Metals had credit sales of $180,000 yearly with

Dome Metals had credit sales of $180,000 yearly with credit terms of net 60 days, which is also the average collection period. If Dome offered a 3 percent discount for payment in 18 days and every cus...

Q: Dome Metals has credit sales of $180,000 yearly with

Dome Metals has credit sales of $180,000 yearly with credit terms of net 60 days, which is also the average collection period. Dome offered a 3 percent discount for payment in 18 days, and Dome reduce...

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Mr. Hugh Warner is a very cautious businessman. His supplier offers trade credit terms of 3/15, net 85. Mr. Warner never takes the discount offered, but he pays his suppliers in 75 days rather than th...

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A firm is currently selling on credit terms of “net 30,” and its accounts receivable average 30 days past due (that is, the firm’s average collection period is 60 days). What credit policy variables m...

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Miranda Tool Company sells to retail hardware stores on credit terms of “net 30.” Annual credit sales are $18 million and are spread evenly throughout the year. The company’s variable cost ratio is 0....

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Epstein Company, a wholesale distributor of jewelry, sells to retail jewelry stores on terms of “net 120.” Its average collection period is 150 days. The company is considering the introduction of a 4...

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In an effort to speed up the collection of receivables, Hill Publishing Company is considering increasing the size of its cash discount by changing its credit terms from “1/10, net 30” to “2/10, net 3...

Q: The North Carolina Furniture Company (NCFC) manufactures upholstered furniture,

The North Carolina Furniture Company (NCFC) manufactures upholstered furniture, which it sells to various small retailers in the Northeast and Midwest on credit terms of “2/10, net 60.” The company cu...

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The Bimbo Corporation has been experiencing a decline in sales relative to its major competitors. Because Bimbo is confident about the quality of its products, it suspects that this sales loss may ref...

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Allied Apparel Company received a large order from Websters Department Stores, which operates a chain of approximately 300 popular-priced department stores located primarily in the New Englandâ&...

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Saccomanno Industries Inc. is considering whether to discontinue offering credit to customers who are more than 10 days overdue on repaying the credit extended to them. Current annual credit sales are...

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The Milton Company currently purchases an average of $22,000 per day in raw materials on credit terms of “net 30.” The company expects sales to increase substantially next year and anticipates that it...

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Q: Which of the following credit terms would you prefer as a customer

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Harpo Music Mart needs to raise $300,000 to increase its working capital. The bank, mindful of Harpo’s strained financial condition, has refused to loan the firm the needed funds. Harpo is considering...

Q: What are the nominal and effective costs of trade credit under the

What are the nominal and effective costs of trade credit under the credit terms of 3 15, net 30?

Q: If a firm buys on trade credit terms of 2/10

If a firm buys on trade credit terms of 2/10, net 50 and decides to forego the trade credit discount and pay on the net day, what is the annualized cost of foregoing the discount (assume a 365-day yea...

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The Caraway Seed Company has for many years cultivated and sold what are known as heritage plants and seeds. For example, it has sought out older varieties of tomato plants that are no longer grown by...

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Q: In Regardless of Your Major: Conflicting Objectives Lead to Problems in

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Game Guys is a retail store selling video games. Sales are uniform for most of the year, but pick up in June and December, both because new releases come out and because games are purchased in anticip...

Q: Why do a firm’s regular credit terms typically conform to those of

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Q: The table below shows that Blair Supply had an end-of

The table below shows that Blair Supply had an end-of-year accounts receivable balance of $300,000. The table also shows how much of the receivables balance originated in each of the previous 6 months...

Q: Gardner Company currently makes all sales on credit and offers no discount

Gardner Company currently makes all sales on credit and offers no discount. The firm is considering offering a 2% discount for payment within 15 days. The firm’s current average collection period is 6...

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Q: Joanne Germano works in an accounts payable department of a major retailer

Joanne Germano works in an accounts payable department of a major retailer. She has attempted to convince her boss to take the discount on the 1/15 net 65 credit terms most suppliers offer, but her bo...

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Prairie Manufacturing has four possible suppliers, all of which offer different credit terms. Except for the differences in credit terms, their products and services are virtually identical. The credi...

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ABC Inc. currently grants no credit, but it is considering offering new credit terms of net 30. As a result, the price of its product will increase by $2 per unit. The original price per unit is $50....

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ABC Inc. grants credit terms of net 25. It is considering a new policy that involves more stringent credit terms: net 20. As a result, the price of its product will stay the same at $45. The expected...

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A firm collects 60 percent of its monthly sales immediately and the rest a month later; its production costs are 80 percent of sales, and it holds two months of sales in inventory. It pays 40 percent...

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From its first day of operations to December 31, 2017, Campbell Corporation provided for uncollectible accounts receivable under the allowance method: entries for bad debt expense were made monthly ba...

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Assume that you have been offered cash discounts on merchandise that can be purchased from either of two suppliers. Supplier A offers trade credit terms of 3/20, net/70, while Supplier B offers 4/15,...

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What conclusions can you make about credit terms from reviewing your answers to Problem 4? Data from Problem 4: Compute the effective cost of not taking the cash discount under the following trade c...

Q: How do credit terms and collection efforts affect the investment in accounts

How do credit terms and collection efforts affect the investment in accounts receivable?

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Kyoto Joe, Inc., sells earnings forecasts for Japanese securities. Its credit terms are 2/10, net 30. Based on experience, 65 percent of all customers will take the discount. a. What is the average c...

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Air Spares is a wholesaler that stocks engine components and test equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increa...

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From its first day of operations to December 31, 2020, Campbell Corporation provided for uncollectible accounts receivable under the allowance method: 1. Entries for bad debt expense were made monthly...

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On January 1, 20X1, Hillock Brewing Company sold 50,000 bottles of beer to various customers for $45,000 using credit terms of 3/10, n/30. These credit terms mean that customers receive a cash discoun...

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Munro Limited is a small company with two divisions. One division trades in specialized equipment for walkers and mountaineers, and the other sells artists’ materials. The company has acquired rights...

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After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Elec...

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Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2021, accounts receivable totaled $625,000. The allowance method is used to account for uncollectible accounts. The al...

Q: Wildcat Sporting Goods (WSG) sells athletic shoes and trendy sports

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Bryan Eubank began his accounting career as an auditor for a Big 4 CPA firm. He focused on clients in the high-technology sector, becoming an expert on topics such as inventory write-downs, stock opti...

Q: Maple Grove Legal Association performs legal services for Weymouth Construction for $

Maple Grove Legal Association performs legal services for Weymouth Construction for $5,000 on account with credit terms of 2/10, n/30. If Weymouth pays the invoice within the discount period, Maple Gr...

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Northern Products reported the following amounts in its 2019 financial statements. The 2018 amounts are given for comparison. Requirements : 1. Compute Northern’s quick (acid-test)...

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Scott’s Cycles sells merchandise on credit terms of 2/15, n/30. A sale invoiced at $1,500 (cost of sales $975) was made to Shannon Allen on February 1. The company uses the gross method of recording s...

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During the depths of the subprime lending crisis in 2008, a major U.S. investment banking firm, Goldman Sachs, required a $10 billion bailout from the U.S. government’s Troubled Asset Relief Pro- gr...

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The Vintage Nursery is a wholesale shop that sells flowers, plants, and plant supplies. The transactions shown below took place during February. All customers have credit terms of n/30. INSTRUCTIONS 1...

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Q: The following accounts and transactions are for Vincent Sutton, Landscape Consultant

The following accounts and transactions are for Vincent Sutton, Landscape Consultant. INSTRUCTIONS Analyze the transactions. Record each in the appropriate T accounts. Identify each entry in the T acc...

Q: Brenda Jo Smith is an architect who operates her own business.

Brenda Jo Smith is an architect who operates her own business. The accounts and transactions for the business follow. INSTRUCTIONS (1) Analyze the transactions for January 20X1. Record each in the app...

Q: On November 15, 2018. Shields Company purchased inventory costing $

On November 15, 2018. Shields Company purchased inventory costing $6,200 on credit. The credit terms were 2/10, n/30. a. Assume that Shields Company paid the invoice on November 23. 2018. Prepare jour...

Q: Schrand Corporation purchases materials from a supplier that offers credit terms of

Schrand Corporation purchases materials from a supplier that offers credit terms of 2/ I 5, n/60. It purchased $12,500 of merchandise inventory from that supplier on January 20, 2019. a. Assume that S...

Q: Bryan Eubank began his accounting career as an auditor for a Big

Bryan Eubank began his accounting career as an auditor for a Big 4 CPA firm. He focused on clients in the high-technology sector, becoming an expert on topics such as inventory write downs, stock opti...

Q: In December 1995, the flamboyant entrepreneur, Michael “Mickey”

In December 1995, the flamboyant entrepreneur, Michael “Mickey” Monus, formerly president and chief operating officer (COO) of the deep-discount retail chain Phar-Mor, Inc., was sentenced to 19 years...