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Ganezh [65]
2 years ago
12

Garcia Industries has sales of $176,500 and accounts receivable of $18,500. Assume all sales to be on credit. The industry avera

ge DSO is 27 days, based on a 365-day year. If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average, and if it earns 3.0% on any cash freed-up by this change, assuming other things are held constant, by how much would the net income be affected?
Business
1 answer:
zloy xaker [14]2 years ago
8 0

Answer:

$163.32

Explanation:

Days Sales Outstanding = 365 * Accounts receivable / Sales

If the Days Sales Outstanding falls to the industry average:

27 = 365 * Accounts receivable / $176,500

27 * $176,500 = 365 * Accounts receivable

Accounts receivable = 27 * $176,500 / 365

Accounts receivable = $13,056.16

Increase in net income = Decrease in accounts receivable * 3%

Increase in net income = ($18,500 - $13,056.16) * 3%

Increase in net income = $5,443.84 * 3%

Increase in net income = $163.3152

Increase in net income = $163.32

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Answer:

Dr. Account Payable  $5,700

Cr. Discount Income  $114

Cr. Cash                      $5,586

Explanation:

Term 2/10, net/30 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after purchase and net credit period of 30 days.

According to given data

Purchases = $5,700

As the payment is made within discount period, so discount will be availed

Discount  = $5,700 x 2% = $114

Amount to be paid = $5,700 - $114 = $5,586

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3 years ago
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Explanation:

If the Market Equilibrium rate is $105 then the company should hire 45 workers as shown in the table.

If they did that, revenue would be $7,425

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6 0
3 years ago
Which of the following is true?
shepuryov [24]

Answer:

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Explanation:

Overhead is an accounting term used for costs that must be paid, even though the company receives no profits. A company would not be able to survive without paying its overhead expenses but the costs are not connected directly to a product or service being generated. Examples of overhead costs are rent, utilities, office supplies, and maintenance.

<em> </em>

<em>Overhead costs are difficult to be traced because they can be assigned to more than one factor.</em>

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3 years ago
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Explanation:

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3 years ago
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