Stegall Company had experienced no growth in sales or net income for several years, At your suggestion, the company changed its credit terms on January 1, 20X4, from n/60 to 2/10, n/30. In addition, the company loosened its requirements to extend credit to new customers. All sales are on account. Selected information, in thousands of dollars, taken from the December 31 financial statements for the past four years follows.

Alice Shirley, a member of the board of directors, has suggested that the company return to its previous credit policies, citing the significant rise in the uncollectible accounts expense.

Required:

Write a memorandum to Alice supporting the new credit policy.

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Item 20X1 20X2 20X3 20X4 Accts. Receivable $496 $492 $514 $384 Allow. for Doubtful Accts. 17 17 18 42 Net Sales 2,653 2,676 2,689 2,945 Uncollectible Accts. Exp. Net Income 26 26 27 58 253 259 262 284