a. What is the required allowance balance on December 31, 2018?b. Prepare the journal entry necessary to bring the Vienna Company'sallowance for credit loss to the balance indicated in the aginganalysis.c. What is the net realizable value of Vienna Company's accountsreceivable at December 31, 2018?d. Vienna should report expected credit loss for 2018 ofe. Vienna's total credit sales for 2018 is 4. Vienna Company produces herbal tea and other slimming products thatare sold throughout the Philippines. While the company isexperiencing a steady growth in sales, it has become noticeable thatcollections of accounts receivable from customers are no longer asfast as they used to be.Vienna Company's products are sold on payment terms of 2/10, n/30.In the past, more than 75% of the credit customers have availed ofthe discount by paying within the discount period. During the yearended December 31, 2018, there has been an increase in the number ofcustomers taking the full 30 days to pay. The company estimates thatless than 60% of the customers are taking advantage of the discount.Expected credit losses as a percentage of gross credit sales haveincreased from the 1.5% provided in the prior years to about 4% inthe current year.The deterioration of accounts receivable collections has prompted thecompany's controller to prepare the following report.Accounts Receivable Collections.December 31, 2018I.II.IV.It is normal that some receivables will prove uncollectible. Infact, annual bad debt write-offs had been 1.5% of total creditsales for many years. However, this rate has increased to 4%during the current year.V.The accounts receivable balance at December 31, 2018, isP3,000,000. The condition of this balance in terms of age andprobability of collection is presented below.Proportionof Total64%18%8%5%3%2%Age Categories1 to 10 days11 to 30 daysPast due 31 to 60 daysPast due 61 to 120 daysPast due 121 to 180 daysPast due over 180 daysProbabilityof Collection99%97.5%III. The allowance for credit loss had a credit balance of P54, 6002018.95%80%65%20%on January 1,The P640,000 expected credit loss provided during the year isbased on the assumption that 4% of the total credit sales willbe uncollectible.Accounts written-off during the year totaled P585,000

Accounts receivable refer to those customers of the business who have purchased the goods on credit…

a. What is the required allowance balance on December 31, 2018? b. Prepare the journal entry necessary to bring the Vienna Company's allowance for credit loss to the balance indicated in the aging analysis. c. What is the net realizable value of Vienna Company's accounts receivable at December 31, 2018? d. Vienna should report expected credit loss for 2018 of e. Vienna's total credit sales for 2018 is

a. What is the required allowance balance on December 31, 2018? b. Prepare the journal entry necessary to bring the Vienna Company's allowance for credit loss to the balance indicated in the aging analysis. c. What is the net realizable value of Vienna Company's accounts receivable at December 31, 2018? d. Vienna should report expected credit loss for 2018 of e. Vienna's total credit sales for 2018 is

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 65P

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Ned Sdn Bhd's trade receivable days have been getting shorter in recent years. Which of the following actions is likely to result in trade receivables days getting longer? A Negotiating longer credit terms with the company's main customer. B Decreasing inventory levels. C Sending reminder letters as soon as the debt is due. D Offering a discount for prompt payment.
Gerard Appliances, Inc., is a small manufacturer of washing machines and dryers. It sells its products to large, established discount retailers that market the appliances under their own names. Gerard generally sells the appliances on trade credit terms ofn/60, but if a customer wants a longer term, it will accept a note with a term of up to nine months. At present, the company is having cash flow troubles and needs $10 million immediately. Its Cash balance is $400,000, its Accounts Receivable balance is $4.6 million, and its Notes Receivable balance is $7.4 million.(a) How might Gerard Appliances use its accounts receivable and notes receivable to raise the cash it needs?(b) What are its prospects for raising the needed cash?
during the year, Marion Produce's receivable collection period increased from 11 to 21 days. the company mKes sales on credit. all customers are allowed credit terms of 1/10, n/30. which is true? a. the company is not doing well in collecting amounts due from customers b. the company is earning less profit on its sales than it has in the past c. the company is doing a better job in collecting amounts owed by customers d the company is writing off more uncollectible accounts than it did in the past
Peanut Inc. is evaluating whether to change its credit terms from 2/10 net 30 to 3/10 net 30. At present, 50% of Peanut's sales are paid at day 10. Regardless of the credit terms, half of the customers who do not take the discount are expected to pay on day 30 whereas the remainder will pay 15 days late (no bad debts exist). But as a result of the higher cash discount offered with the new terms, sales are expected to increase from 757,000 to 801,000 per year. Peanut's variable cost ratio is 75% and its cost of funds is 8.7%. All production costs are paid on the day of the sale. Should the change be made?
Mathis Incorporated and Hashey Companies are two of the largest and most successful toymakers in the world, in terms of the products they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following information reported in their annual reports (amounts in millions). Fiscal Year Ended: Net Sales Accounts Receivable Allowance for Doubtful Accounts Accounts Receivable, Net of Allowance Required: Req 1 Req 2A 1. Calculate the receivables turnover ratios and days to collect for Mathis and Hashey for 2018 and 2017. TIP: In your calculations, use average Accounts Receivable, Net of Allowance. 2-a. Which of the companies was quicker to convert its receivables into cash in 2018? 2-b. Which of the companies was quicker to convert its receivables into cash in 2017? Complete this question by entering your answers in the tabs below. Req 2B Receivables Turnover Ratio Days to Collect 2018 $ 5,656 1,158 21 1,137 Mathis 2018 Mathis 2017 $…
Coca-Cola and PepsiCo are two of the largest and most successful beverage companies in the world in terms of the products that they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following rounded amounts reported in their annual reports (amounts in millions). Fiscal Year Ended: Net Sales Accounts Receivable Allowance for Doubtful Accounts Accounts Receivable, Net of Allowance Req 1 Req 2A Required: 1. Calculate the receivables turnover ratios and days to collect for Coca-Cola and PepsiCo for 2018 and 2017. 2-a. Which of the companies was quicker to convert its receivables into cash in 2018? 2-b. Which of the companies was quicker to convert its receivables into cash in 2017? Complete this question by entering your answers in the tabs below. Receivables Turnover Ratio Days to collect Req 2B X Answer is complete but not entirely correct. Coca-Cola 2018 $ 31,860 3,890 490 3,400 2018 8.7 x 41.6 PepsiCo Coca-Cola 2017 9.0…
Ascenda Corp, distributes the "Smart" brand of electronic controller systems. The company currently has a credit policy of 1/10, not 40, though an average only 20% of the customers pay in 10 days and take the discount, while another 30% pay on average in 15 days yet still take the unearned discount. The company's remaining customers pay on average in 50 days. Bad debt losses are 3% of sales. The company's sales are currently $600,000 per month, all on credit. Ascenda is thinking of restructuring its credit and collections department, with the goal of eliminating all unearned discounts and reducing bad debt losses to 1 5% With this new policy, the company believes that sales will fall by 5% and 40% of the customers will pay in 10 days and obtain the discount, and that the remaining customers will pay in 40 days Ascenda's vanable costs are 60% of sales, its monthly collections department expense is expected to rise by $6,000 to $20,000, and its opportunity cost on funds is 12% Acsenda's…
Fizzy Sodas and Hayes Companies are two of the largest and most successful beverage companies in the world in terms of the products that they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following rounded amounts reported in their annual reports (amounts in millions). Fiscal Year Ended: Net Sales Accounts Receivable Allowance for Doubtful Accounts Accounts Receivable, Net of Allowance Req 1 Complete this question by entering your answers in the tabs below. Req 2A Required: 1. Calculate the receivables turnover ratios and days to collect for Fizzy Sodas and Hayes Companies for 2018 and 2017. 2-a. Which of the companies was quicker to convert its receivables into cash in 2018? 2-b. Which of the companies was quicker to convert its receivables into cash in 2017? Req 2B Receivables Turnover Ratio Days to collect 2018 2018 $ 40,630 4,410 620 3,790 Fizzy Sodas Fizzy Sodas 2017 $ 45,120 4,710 610 4,100 Hayes Companies…
The AR Company had sales of $5 million in 1991. It is estimated that 80% of all sales are on credit. a. If the balance in accounts receivable at the end of 1991 was $500,000 and $750 million , how long did it take AR’s customers to pay? b. Suppose AR extends credit to customers on the basis of 2/10, net 30. How does the actual time it takes customers to pay compare with these credit terms if the accounts receivable balance is $500,000? if the accounts receivable balance is $750? c. Critique the use of the number of days credit to evaluate AR’s collections.
Bob's Product Company takes 20 days to convert its raw materials to finished goods, 15 days to sell it, and 25 days to collect its credit sales. What is the company’s days receivable period? Group of answer choices 60 35 25 10 15 A bank letter of credit, sometimes called a standby letter of credit, is a written promise by a bank that it will make a payment on behalf of the customer. This is different than a line of credit, which is a akin to a credit card….a line of credit allows the company to borrow funds as needed to pay any bills. A LETTER of credit is specific to the party that the company might owe money to. Group of answer choices True False
White Inc. wishes to speed up collection of its receivables. White currently offers credit terms of 1/20, net 40. It is considering changing to terms of 2/15 net 30. The collection period is expected to be reduced from 40 to 20 days. The percentage of customers paying within the discount period is expected to increase from 50 percent to 75 percent. Bad debt losses average 6 percent of sales and are not expected to change under the proposed policy. The inventory level is expected to increase by $2,000,000. Annual sales are $30 million. The variable cost ratio is 70 percent. The pretax return on funds made available by this change in policy is 10 percent. Assuming the change in terms is made; determine the net effect on White’s pretax profits.
ABC Distributing Company sells small appliances to hardware stores. The President of the Company thinking about changing the credit policies offered by the firm to attract customers away from competitors. The current policy calls for a 1/10, net 30, and the new policy would call for a 3/10, net 50. Currently 40% of the customers are taking the discount, and it is anticipated that this number would go up to 50% with the new discount policy. It is further anticipated that annual sales would increase from a level of $200,000 to $250,000 because of the change in the cash discount policy. The increased sales would also affect the inventory level. The average inventory carried by Company is based on a determination of an EOQ. Assume unit sales of small appliances will increase from 20,000 to 25,000 unit. The ordering cost for each is $100 and the carrying cost is based on EOQ/2. Each unit in inventory has an average cost of $6.50. CoGS is equal to 65% of net sales; general and adm. expenses…