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Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. Collection costs are 6 percent of new sales; production and selling costs are 74 percent; and accounts receivable turnover is four times. Assume income taxes of 20 percent and an increase in sales of $65,000. No other asset buildup will be required to support the increased sales activity. (a) What is the level of accounts receivable to support this sales expansion? (b) What would be Henderson’s incremental aftertax return on investment? (c) Should Henderson liberalize credit if a 16 percent aftertax return on investment is required? Assume that Henderson also needs to increase its level of inventory to support new sales and that inventory turnover is two times. (d) What would be the total incremental investment in accounts receivable and inventory to support a $65,000 increase in sales? (e) Given the income determined in part b and the investment determined in part d, should Henderson extend more liberal credit terms?
Prepare the journal entries to record the estimated warranty costs and (b) the actual costs incurred and Preparation of journal entries to record
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Great Corp. sells its product for $30. Variable costs are $10 per unit. At the current volume of 40,000 units sold per year, the company is just breaking even. Given this data, the annual fixed costs are?
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Woody's Cafe Real Estate tax of $1,110.85 was due on November 1, 2011. Due to financial problems Woody was unable to pay his cafe real estate tax bill until January 15, 2012. The penalty for late payment is 8 1/4% ordinary interest.
Assuming all of the containers produced by the bottle Division can be sold to outside companies, which of the following is the range at which a negotiated transfer price among the two divisions should occur?
Create the required general journal entry to record the subsequent transactions for the Flaherty Company incurred $95,000 of factory labor costs which is paid in cash.
Purpose absorption and contribution margin income statements for the succeeding quarter for the division. Evaluate production costs per unit for both approaches and for both quarters.
An article recently appeared in the Wall Street Journal indicating that companies are selling their receivables at a record rate. Discuss reasons why a company may want to sell their receivables and the advantages and disadvantages of this practi..
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