Berkeley Prints Berkeley Prints Expects to Have Sales This Year of $15

question 25

Multiple Choice

Berkeley Prints
Berkeley Prints expects to have sales this year of $15 million under its current credit policy. The present terms are net 30; the days sales outstanding (DSO) is 60 days; and the bad debt loss percentage is 5 percent. Also, Berkeley's cost of capital is 15 percent, and its variable costs total 60 percent of sales. Because Berkeley wants to improve its profitability, a proposal has been made to offer a 2 percent discount for payment within 10 days; that is, change the credit terms to 2/10, net 30. The consultants predict that sales would increase by $500,000, and that 50 percent of all customers would take the discount. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 4 percent.
-Refer to Berkeley Prints.What would be the cost to Berkeley of the discounts taken?

• A) $116,750
• B) −$108,750
• C) $155,000
• D) $225,000
• E) $260,500

Define assets and their impact on the balance sheet.

Understand the structure and purpose of the balance sheet and its major components.

Recognize the advantages of different business structures like corporations and partnerships.

Identify the objective of the balance sheet and understand financial statements' roles.