Essence of Skunk Fragrances, Ltd., sells 5,900 units of its perfume collection e

Question

Essence of Skunk Fragrances, Ltd., sells 5,900 units of its perfume collection each year at a price per unit of S389. All sales are on credit with terms of 1/20, net 20. The discount is taken by 45 percent of the customers. (Enter your answer as directed, but do not round intermediate calculations.) Requirement 1: What is the amount of the company's accounts receivable? (Round your answer to 2 decimal places (e.g., 32.16).) Requirement 2: In reaction to sales by its main competitor, Sewage Spray. Essence of Skunk is considering a change in its credit policy to terms of 3/20, net 20 to preserve its market share. Will this change in policy increase or decrease accounts receivable?

Explanation / Answer

Ans) 1.sales = 5900 * 389 = 2295100

Credit Policy 1/20,

Account Receivables = 2295100 - 45% = 1262305

2. If Credit Policy is Changed to 3/20, it will reduce the account receivables

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