Scribd Logo
Upload

Welcome to Scribd!

  • 19 views

    Toaz - Info Chapter 16 Mas Agamata Answer Key PR

    Uploaded by

    s2022100196

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Toaz - Info Chapter 16 Mas Agamata Answer Key PR

    Uploaded by

    s2022100196
    19 views5 pages

    Original Title

    Toaz.info Chapter 16 Mas Agamata Answer Key Pr 65c846de1a8fc0b7d3b0df8f74063b77

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    19 views5 pages

    Toaz - Info Chapter 16 Mas Agamata Answer Key PR

    Uploaded by

    s2022100196

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    This Accounting Materials are brought to you by www.everything.freelahat.

    com

    CHAPTER 16
    RECEIVABLES MANAGEMENT

    [Problem 1]
    Before After
    1. Receivable turnover
    (360 days/60 days) 6x 18x (360 days/20 days)

    2. A/Rec balance
    (P21.6M/6) P3.6M P1.2M (P21.6M/18)

    3. Investment income [(P3.6M - P1.2M) x 15%] P360,000


    Discount taken (P21.6M x 80% x 2%) (345,600)
    Decrease in collection costs 90,000
    Net advantage of the new credit policy P104,400

    [Problem 2]
    Before After
    1. Receivable turnover 8x 12x
    2. A/Rec balance (P24M/8) P3.0M P2.0M (P24M/12)
    3. Investment income [(P3.0M - P2.0M) x 12%] P120,000
    Increase in collection costs (P400,000 – P250,000) (150,000)
    Decrease in bad debts (1% x P24M) 240,000
    Net advantage of the new collection policy P210,000

    [Problem 3]
    Before After
    Sales P60M P69M (P60M x 115%)
    Collection period 45 days 75 days
    Receivable turnover (360
    days/collection period) 8x 4.8x
    A/Rec. balance
    (Sales/Rec Turnover) P7.5M P14.375M
    Bad debts (1.5% x P60M) P900.000 P2.070 M (P69M x 3%)

    Incremental CM (P9M x 80%) P7,200.000


    Opportunity costs [(P14,375,000-P7,500,000)x80%x 20%] (1,100,000)
    Increase in bad debts (P2,070,000-P900,000) (1,170,000)
    Increase in collection costs ( 200,000)
    Incremental IBIT P4,730,000
    This Accounting Materials are brought to you by www.everything.freelahat.com

    The company is advised to extend its credit period and increase its income
    before income tax of P4.73 million.

    [Problem 4]
    Before After Charge
    Net credit sales (P10Mx80%) P8M P8M P-
    Collection period 60 days 40 days 20days
    Receivable turnover 6x 9x 3x
    A/Rec balance
    (Net Credit Sales/Rec Turnover)P1,333,333 P888,889 P(444,444)

    Investment income (P444,444x12%) P 53,333


    Discount taken (P8Mx60%x2%) (96,000)
    Net disadvantage of the new policy P(42,667)

    [Problem 5]
    A/Rec (old) = [P12M/(360/75 days)] = P2,500.000
    A/Rec (new) = [P12M/(360/75 days)] = 2,000.000
    Decrease in A/ Rec balance P 500,000

    Cost of fund = 20% Cost of fund =10%


    Investment income
    (P500,000 x 20%) P100,000
    (P500,000 x 10%) P 50,000
    Decrease in bad debts
    (1% x P12 million) 120,000 120,000
    Increase in collection costs (180,000) (180,000)
    Net advantage (disadvantage)
    of doubling the collection
    personnel P 40,000 P (10,000)

    [Problem 6]
    Bad debts expense without credit-rating information:
    Low risk (P2.5 million x 30% x 3%) P 22,500
    Medium risk (P2.5 million x 50% x 7%) 87,500
    High risk (P2.5 million x 20% x 24%) 120,000 P230.000
    Bad debt expense with credit-rating information
    (P2.5 million x 3%) (75,000)
    Decrease in bad debt with credit-rating information 155,000
    Cost of credit-rating information [(P2.5M/P50)xP4] (200,000)

    P2.5 million
    P50
    This Accounting Materials are brought to you by www.everything.freelahat.com

    Net disadvantage of obtaining credit information P (45,000)

    [Problem 7]

    Effective Discount rate = ?

    1. EDR = (360/15) x (1%/99%) = 24.24%


    2. EDR = (360/10) x (1%/99%) = 36.36%
    3. EDR = (360/20) x (2%/98%) = 36.73%
    4. EDR = (360/50) x (2%/98%) = 14.69%
    5. EDR = 24.49%
    6. EDR = 22.67%
    7. EDR = 55.67%

    [Problem 8]

    1. Credit sales P72,000,000


    Allowance for bad debts 1,600,000
    Net credit sales P70,400,000

    Receivable turnover (360 days/30) 12x

    A / Rec bal (2003) = (P70,400,000/12) = P5,866,667

    2. a) Return on assets = (P5M / P40M) = 12.5%

    b) Asset turnover = (P80M / P40M) = 2 times

    c) Sales (P92M + P8M) P100,000,000


    Materials and supplies [P10Mx(100/80) (12,500,000)
    Labor [P40Mx(100/80)] (50,000,000)
    Fixed overhead (7,400,000)
    Administrative expense (3,000,000)
    Variable selling expense [P8Mx(100/80)] (10,000,000)
    Bad debt (2,400,000)
    Income before income tax P 14,700,000
    Less: Tax (50%) 7,350,000
    Net Income P 7,350,000
    This Accounting Materials are brought to you by www.everything.freelahat.com

    d) Total assets before adjustments P40,000,000


    Increase in A/Rec 9,066,666
    Increase in inventory 5,670,000
    New total assets P54,736,666

    New A/Rec Bal


    = [(P92,000,000-P2,400,000) / (360 days/60 days)]

    = P89,600,000 / 6 = P14,933,333

    Old A/Rec Bal 5,866,667


    Increase in A/Rec Balance P 9,066,666

    Return on assets = P7,350,000 / P54,736,666 = 13.43%

    e) Yes, the company will be better off financially after the change
    in credit policy as indicated by an increase in ROA from
    12.5% to 13.43%. However, it should be noted that the nature
    and cost of financing the current asset expansion have not
    been considered. These may have an impact on cost of doing
    business and eventually on the return on assets.

    [Problem 9]

    1. Effective discount rate [(360/14)x(1%/99%)] 36.36%


    Effective interest rate:

    Amount borrowed (P99,000/85%) P116,471


    EIR [(P116,471 x 85%) / P99,000] 10.00%
    Advantage of taking the discount per year 26.36%

    2. Effective discount rate [(360/40) x (1%/99%)] 9.09%


    Effective interest rate 10.00
    Advantage of not taking the discount (0.91%)

    3. Using a 60-day payment period increases the length of time to avail


    the discount, hence, effectively reducing the discount rate. This
    makes answer in letter "b" in favor of not taking the discount and not
    borrowing from the bank to take the discount. It does not give added
    benefit to the National Corporation.
    This Accounting Materials are brought to you by www.everything.freelahat.com

    You might also like