the answers to questions was not complete Fraction of Year Interest in Doltars T
ID: 2571375 • Letter: T
Question
the answers to questions was not complete
Fraction of Year Interest in Doltars Total Ieteres $450 S1,375 (e) $60,000 (d) $50,000 1 80 days 1 20 day 8/172013 does sell on account to some regular customers; and manages the rosulting Accounts Receivable. Average experience for the past three years y accepts new customers for sales on accorn. BCC $350,000 $200,000 5150,000 Cost of Goods Sold Bad Debt Expense Additional Operating Expenses 4,000 61,000 Buck Anderson, the menager and sole shareholder, is considering loosening the credit pol cards leg, VISA & Mastercard. He expects to sell 10% more comee from ALL sales will be via credis card. Also Buckbelieves that switching to credi easing credit restrictions. And be assumes that g and additional operating expenses. However VISA and Mastercard will charge BCCI t eards will save the business $2,000 o credit-card sales. Instructions (assume no income taxes) · Shuld BCC contract with Visa and Mastercard and start accepting credit cards income statements under the present projections) Buck has learned that credit card companies are planning to riple their fees, does your answer change? (to answer the quest on prepare and then under the credit card plan, tben compare Net Income 2. 3. Information related to Cicero Corp for 2016 is summarized below Total Sales on account during 2016 $2,000,000 Customer Accounts written off during 2016 $36,000 (including Vclo Inc.'s balance of $2,000 on Jan. 21,2016) a. What amount of Bad Debts Expense will Cicero Corp. report for 2016 if it uses the specific charge-off method to c. Assume Cicero Corp. employs the theoretically better allowance method for recording Bad Debt Expense. Also A/R, Gross as of 12/31/2016 $800,000 (assume this balance regardless of info presented below Instructions: unless otherwise indicated, assume each item is an independent situation account for bad debts? b. What are the weaknesses in using the specific charge-off method of reporting Bad Debts Expense? assume the January 1, 2016 balance in AFDA is $40,000. Did management overestimate or underestimate actuaExplanation / Answer
As per the chegg's policy I am allowed to answer only the first question so please don't mind and ask other questions separately.
A.
The income statement earlier:
Net sales = 350000
Cost of goods sold = 210000
Bad debt expenses = 4000
Additional operating expenses = 61000
So, net income = 350000-210000-4000-61000 = 75000
Income statement under credit card facilities:
Net sales = 350000*1.1 = 385000
Cost of goods sold = 210000*1.1 = 231000
Bad debt expenses = 4000
Additional operating expenses = 61000-2000 = 59000
Credit card expenses = 0.02*350000 = 7000
Net income = 385000-231000-4000-59000-7000 = 84000
Since the net income increases, the credit card facilities should be given and credit to be extended.
B) Now, credit card expenses = 7000*3 = 21000
Net income = 385000-231000-4000-59000-21000 = 70000
Since now the net income is less than the original income, the credit card facilities should not be given.
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