BTN $4-4$ Refer to the opening feature about Kendra Scott. Assume the business reports current annual sales at approximately $$1$ million and prepares the following income statement.

KENDRA SCOTT

Income Statement

For Current Year Ended December $31$

Net sales $.................................$ $$1,000,000$

Cost of sales $...............................,610,000$

Expenses $($other than cost of sales$)............200,000$

Net income

$190,000$

Assume the business sells to individuals and retailers, ranging from small shops to large chains. Assume that it currently offers credit terms of $\frac{1}{15},\frac{n}{60},$ and ships FOB destination. To improve its cash flow, it is considering changing credit terms to $\frac{3}{10},\frac{n}{30}.$ In addition, it proposes to change shipping terms to FOB shipping point. It expects that the increase in discount rate will increase net sales by $9\%,$ but the gross margin ratio $($and ratio of cost of sales divided by net sales$)$ is expected to remain unchanged. It also expects that delivery expenses will be zero under this proposal; thus, expenses other than cost of sales are expected to increase only $6\%.$

Required

Prepare a forecasted income statement for the next year ended December $31$ based on the proposal.

Based on the forecasted income statement alone $($from your part $1$ solution$),$ do you recommend that the business implement the new sales policies? Explain.

What else should the business consider before deciding whether to implement the new policies? Explain.