Sample Problem 1.

Change in credit policy

Rey Company is considering to change its credit policy from 2/10, n/30 to 2/15, n/45. This change wold
psh the 2012 sales to reach !4" million, or an increase of 20# from last year$s. %inety percent of total
sales wold &e on credit. 'ighty percent of credit cstomers are e(pected to a)ail of the discont offered
&y Rey Company. *cconts recei)a&le at the end of year is estimated at 15# of sales. +aria&le costs
ratio shall &e maintained at ,5#.
-n relation to changing the credit terms, collection costs wold increase &y 10# of the incremental sales.
.o&tfl acconts are e(pected to increase from 1# to 2.,5# of credit sales. The effecti)e rate of retrn
on a gi)en in)estment is determined at 12#.
Re/ired0 1hold Rey Company change its credit policy in 20122 !repare reconciliations.
Sample Problem 2. Receivable portfolio analysis
3et s assme the following aging of recei)a&les of companies 4 and 5 and frther assme that the
collecta&ility rate of the each grop is as follows0
Company 4 Company 5
*ccont grop *mont 1pread *mont 1pread
Crrent *ccont ! 6,000,000 ,5.00 # ! 2,000,000 25.00 #
!ast de acconts
01730 days 1,000,000 12.50 3,500,000 43.,5
31760 days 500,000 6.25 1,000,000 12.50
61780 days 300,000 3.,5 500,000 6.25
817120 days 100,000 1.25 400,000 5.00
12171"0 days 50,000 0.62 300,000 3.,5
1"17360 days 30,000 0.3" 200,000 2.50
9ore than 360 days 20,000 0.25 100,000 1.25
Total accont recei)a&les ! ",000,000 100.00 # ! ",000,000 100.00 #
Account Group Collectability rate Account Group Collectability Rate
Crrent accont 88#
!ast de acconts
01730 days 8, 817 120 days 80#
31760 days 85 12171"0 days "0
61780 days 83 1"17360 days ,0
9ore than 360 days 50
-t is also determined that of the accont grop :more than 360 days; there are certain acconts that were
appro)ed to &e written off amonting to !5,000 for Company 4 and !40,000 for Company 5.
Re/ired0 <ased on the data a&o)e, compte for the do&tfl acconts for each of the company.