You have just been hired as the new credit manager for Harrell and Company, a chain of lumber stores. While evaluating the accounting system, you notice that many of the credit accounts are 120 to 180 days past due. Although these customers ultimately pay their accounts, they do not abide by the n/30 terms specified on the sales invoice.

At your suggestion, management has approved a plan to change the credit terms to 2/10, n/30, with 18% interest charged on overdue accounts. In addition, you will require a note receivable to be signed for accounts over 90 days past due as a condition for the customer to receive additional credit.

Required:

Prepare a letter to send to current credit customers informing them of the new credit terms.