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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
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P2.5 million P50
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chapter-16 - This Accounting Materials are brought to you by

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