Is the ratio increasing? Decreasing? Is it appropriate and in line with the payback requirement of every 30 days in the current credit granting policy?

Fisher and Sons has been allowing customers to purchase furniture and other housewares on account using a basic accounts receivable structure where customers are expected to pay their accounts off every 30 days. Many of their credit customers are professional designers and contractors who use the furniture they purchase to stage homes and fill their own storefronts with examples of their design work for customers to view. The company’s credit granting policy is to run a credit check on the customer requesting credit, and barring any major judgments or delinquencies in the past 2 years, they grant the credit to the customer with a basic in-store application and a credit card on file as a good-faith promise to pay. Client accounts are written off as bad debts only when a bankruptcy notice or a death notice is received, meaning some of the accounts on the books could be very old. The company does not often write off accounts, and their auditor has now stated they need to begin estimating bad debts using one of the two GAAP approved methods of writing off receivables: the percentage of sales method or the aging of receivables method. Prepare a memo directed to company management discussing the following items: Possible improvements to the current accounts receivable credit granting policy. Use facts from the spreadsheet and calculations you made to support your position if you believe changes should be made to the policy. Rewrite the policy for management’s review with your revisions and suggestions. Your findings in the calculation of uncollectible accounts expense under both aging of receivables and percentage of sales methods. Include recommendation of which method of estimating uncollectible accounts you feel would be most appropriate for a business in the furniture industry given the information you know and/or research about the company and the industry. Your findings from the calculations of the accounts receivable turnover ratio, comparing the past three years. What should the target figure be for the accounts receivable turnover ratio based on the current credit granting policy? Format and organize your memo in a suitable manner, and use citations appropriately.

Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.

[order_calculator]