Union company is considering establishment of a zero-balance account.


14-9 Accounts receivable varys delay bad debts

A strong is evaluating an statements receivable vary that would growth bad debts from 2% to 4% of sales. Sales are currently 50,000 compatability, the selling charge is $20 per part-among, and the mutable require per part-among-among is $15. As a conclusion of the incomplete vary, sales are prearrange to growth to 60,000 compatability.

a. What are bad debts in dollars currently and below the incomplete vary?

b. Calculate the require of the final bad debts to the strong.

c. Ignoring the added benefit-service oblation from growthd sales, if the incomplete vary saves $3,500 and causes no vary in the middle cannonade in statements receivable, would you confide it? Explain.

d. Considering all changes in requires and benefits, would you confide the incomplete vary? Explain.

e. Compare and argue your answers in compatability c and d.


14-16 Zero-neutralize statement Union Company is regarding establishment of a zero-neutralize statement. The strong currently guards an middle neutralize of $420,000 in its expenditure statement. As amercement to the bank for guarding the zero-neutralize statement, the strong conquer entertain to pay a monthly fee of $1,000 and guard a $300,000 non–interest-earning guard in the bank. The strong currently has no other guards in the bank. Evaluate the incomplete zero-neutralize statement, and fabricate a confideation to the strong, pretentious that it has a 12% occasion require.

15-9
Cost of bank advance Data Back-Up Systems has obtained a $10,000, 90-day bank advance at an annual curiosity-behalf trounce of 15%, payable at manliness. (Note: Assume a 365-day year.)

a. How abundant curiosity-behalf (in dollars) conquer the strong pay on the 90-day advance?

b. Confront the operative 90-day trounce on the advance.

c. Annualize your conclusion in part-among-among b to confront the operative annual trounce for this advance, pretentious that it is rolled balance total 90 days throughout the year below the similar provisions and plight.