Module 4 ccc7 - plan is that it could potentially increase...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
a) 1. Gross profit rate: $1,025 – $566 = $459 $459 ÷ $1,025 = 44.8% 2. Revenue is recorded when earned or after; the sales effort is complete, revenues can be measured, collection is reasonably assured, and material expenses can be determined and matched Cash basis is used only when it is difficult to determine the revenue amount at the time of a credit sale because collection is uncertain. If collection is uncertain under the payment plan, it may be appropriate to recognize revenue using installment method. If collection is certain, or any bad debts can be reasonably estimated, then revenue is recognized at the point of sale. 3. The advantage of using an extended payment
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: plan is that it could potentially increase sales. The disadvantage of this type of plan is that it will have costly follow up. Another potential risk is that you could lend to people with poor credit thus losing money when they fail to repay the extended debt. (b) Natalie should not allow her customers to pay on an extended payment plan. The plan would cost Natalie a great deal if problems arose that preventing collection of the debts. Natalie would also lose a significant amount of cash due to the extended payment plan; this would hinder her ability to purchase everyday needed supplies such as supplies for baking and her office....
View Full Document

Page1 / 3

Module 4 ccc7 - plan is that it could potentially increase...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online