Cannon Company Has Enjoyed a Rapid Increase in Sales in Recent

question 75

Multiple Choice

Cannon Company has enjoyed a rapid increase in sales in recent years, following a decision to sell on credit. However, the firm has noticed a recent increase in its collection period. Last year, total sales were $1 million, and $250,000 of these sales were on credit. During the year, the accounts receivable account averaged $41,096. It is expected that sales will increase in the forthcoming year by 50 percent, and, while credit sales should continue to be the same proportion of total sales, it is expected that the days sales outstanding will also increase by 50 percent (assume a 365-day year) . If the resulting increase in accounts receivable must be financed by external funds, how much external funding will Cannon need?

• A) $ 41,664
• B) $ 51,370
• C) $ 47,359
• D) $106,471
• E) $ 93,750

---

Definitions:

Immigrants

People who move to a new country or region, intending to settle and reside there, often in search of a better quality of life or opportunities.

McNary-Haugen Bill

Vetoed by President Calvin Coolidge in 1927 and 1928, the bill to aid farmers that would have artificially raised agricultural prices by selling surpluses overseas for low prices and selling the reduced supply in the United States for higher prices.

Calvin Coolidge

The 30th President of the United States (1923–1929), known for his small government conservatism and for his quiet and reserved personality, leading the nation through the Roaring Twenties.

Laissez-faire Economics

An economic theory advocating minimal government intervention in the marketplace and allowing free interaction of supply and demand.