Problem 7-17 Credit policy decision [LO7-4]

Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $110,000 if credit were extended to these new customers. Of the new accounts receivable generated, 5 percent will prove to be uncollectible. Additional collection costs will be 2 percent of sales, and production and selling costs will be 70 percent of sales. The firm is in the 10 percent tax bracket.

a. Compute the incremental income after taxes.