A change in credit policy has caused an increase in sales, an increase in discounts taken, a reduction in the investment in accounts receivable, and a reduction in the number of doubtful accounts. Based upon this information, we know that a)Net income has increased b)The average collection period has decreased. c)Gross profit has declines d)The size of of the discount offered has increased

A change in credit policy has caused an increase in sales, an increase in discounts taken, a reduction in the investment in accounts receivable, and a reduction in the number of doubtful accounts. Based upon this information, we know that a)Net income has increased b)The average collection period has decreased. c)Gross profit has declines d)The size of of the discount offered has increased

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 11MC: Which of the following best represents a positive product of a lower number of days sales in...

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Question Which of the following changes in credit standards and conditions would cause an improvement in profit? A) An increase in the percentage of doubtful collections. B) An increase in collection expenses. C) Decrease in units sold D) Increase in the turnover of accounts receivable.
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31 - Which of the following is not among the consequences of a loose credit policy ? a) Sales increase B) Collection expenses increase NS) Funds tied to receivables increase. D) The amount of doubtful receivables decreases. TO) Transaction costs increase as they analyze new customers.
If a firm's current ratio and quick ratio have been steadily decreasing, the underlying cause might be traced to their credit manager's relaxed attitude about enforcing prompt payment from customers.
Which of the following reasons should not be considered in order to explain why the receivables appear to be abnormally high? a. Sales volume expanded materially late in the year. b. Material amount of receivables are on the installment basis. c. Receivables have collectability problems and possibly some should have been written off d.Sales volume decreases materially late in the year.
7.-What are the likely effects on sales of the following change in credit policy: A) Lower the salary level required of credit applicants. A) Decrease the discounts for prompt payment. B) Increase the percentage of uncollectible accounts. C) Decrease sales volumes D) Increase sales volume
If sales were overstated by recording a false credit sale at the end of the year, where could you find the false “dangling debit”?a. Inventory.b. Cost of goods sold.c. Bad debt expense.d. Accounts receivable.
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Suppose a company’s current credit terms are 1/10,net 30, but management is considering changingits terms to 2/10, net 40, relaxing its credit standards, and putting less pressure on slow-payingcustomers. How would you expect these changesto affect (a) sales, (b) the percentage of customerswho take discounts, (c) the percentage of customers who pay late, and (d) the percentage of customers who end up as bad debts?