Reference no: EM133114957

Question - Jim Perry operates a large fruit and vegetable stand on the outskirts of a city. In a typical year he sells $600,000 of goods to regular customers. His sales are 40% for cash and 60% on credit. He carries all of the credit himself. Only after a customer has a $300 unpaid balance on which no payments have been made for two months does he refuse that customer credit for future purchases. His income before taxes is approximately $95,000. The total of doubtful accounts for a given year is $48,000.

You are one of Perry's regular customers. He knows that you are taking a college course in accounting and has asked you to tell him your opinion of several alternatives recommended to him to reduce or eliminate the $48,000 per year doubtful accounts expense. The alternatives are as follows:

-Do not sell on credit.

-Sell on credit by credit card

-Allow customers to charge only until their account balances reach $50.

-Allow a bill collector to go after doubtful accounts and keep half of the amount collected.

Write a report for Perry about the advisability of following any of these alternatives.