REQUIRED

Answer the following questions from the information provided below:

$3\mathrm{.}1\mathrm{.}1$ Calculate the profit that Bellair Stores would make if the account is settled in $12$ days'

time.

$3\mathrm{.}1\mathrm{.}2$ Should the customer fail to pay the amount due and the account is written off after $120$

days, how much would be the loss to Bellair Stores?

INFORMATION

Bellair Stores intends selling a washing machine on credit. The selling price of the washing machine is

R$9000.$ The washing machine is priced at cost plus $50\%.$ Credit terms of $\frac{3}{12}$ net $90$ were agreed upon.

The cost of capital is $18\%.$

$3\mathrm{.}2$

If Cato Trader's required rate of return on equal$-$risk investments is $15\%,$ should the proposed

increase in the discount offered $($from $2\%$ to $3\mathrm{.}5\%)$ be made? Show all the calculations.

INFORMATION

The credit terms of Cato Traders are currently $\frac{2}{10}$ net $30.$ The selling price of the only product that it sells is

R$20$ per unit and the variable costs are R$11$ per unit. The management wants to determine whether the profit

will increase if the settlement discount increases from $2\%$ to $3\mathrm{.}5\%.$ The following is expected to occur if the

credit terms change from $\frac{2}{10}$ net $30$ to $\frac{3\mathrm{.}5}{10}$ net $30$ :

The percentage of the credit sales that the discount will apply to will increase from $50\%$ to $70\%.$

The debtors collection period will drop by $7\mathrm{.}30$ days from the current $36\mathrm{.}50$ days.

Credit sales will increase from the current $30000$ units by $20\%.$

Bad debts will drop from $5\%$ of credit sales to $3\%$ of credit sales.