Hello would you please help me to answer the question of my professor with regards on accounting.

Please see below question and kindly see the attached file for your references

Lesson 1 QUESTION

• 1.Whyshouldcollectionofreceivablesbehandledproperly?2.Betacompanyproposestoimproveitscollectionperformance.ItintendstoincreaseitslevelofcollectionexpensesfromP150,000toP250,000onsalesofP10million.Thismoveisexpectedtocutdebtlossesbyonepercent.Alsoturnoverofreceivablesisexpectedtoincreasefrom10to12timesperyear.Shouldthefirmgoaheadwithitsplan?Supportyouranswer.

Lesson 2 QUESTION

1. Whatarereasonswhyinventoryshouldbeproperlymanaged?

2. A certain appliance store has the following items in its inventory.

Item No. Price Quantity Cost

201 P 150 200 P 20,000

202 350 150 40,000

203 500 120 10,000

204 1,000 80 50,000

205 3,000 50 100,000

206 5,000 35 40,000

207 8,000 25 40,000

208 15,000 20 40,000

209 25,000 12

210 50,000 8

Classify the items in top "A", "B" and "C" items and then perform the so-called

ABC Method of Inventory Control.

3. A local gift shop wants to know how many sets of a certain gift items to order. The manager of the store feels that gift item would sell for about 1,000 sets next year. At a [price of P250 per set. The wholesale price of that item is P200 per set. The costs of carrying one set of that gift item is calculated to be P200 per year, while the ordering costs are placed at P200.

A. How many sets should be the gift shop order pursuant to the Economic Order Quality Method?

B. What would be the inventory costs of that item per year, if the gift shop bought or ordered that much quantity that you determined in 3-a?

Lesson 3

1. Is it possible for a business to operate without working capital? Explain your answer.

2. Supposing the normal capital requirement of a certain business is two months costs and expenses, while the working capital of that business is good to cover six months costs and expenses, is this "good " for the business? Explain your answer.

3. The current asset and current liabilities portion of the balance sheet of ABC Company as of December 2012 are shown below (in thousands):

Current Assets Current Liabilities

Cash P100 Accounts Payable P200

Accounts Receivable 200 Loans Payable 300

Marketable Securities 150 Accruals 100

Mdse. Inventories 550

Total Current Assets P1,000 Total Current Liabilities P600

The firm's Income Statement for the year ending 31 December 2012 is also shown (in thousands):

Sales P 3,000

Less Cost of Sales 1,700

Gross Profit 1,300

Less Operating Expenses 800

Net Profit before tax P 500

Calculate the following:

a.The amount of gross working capital

b. The net working capital

c. The length of time that the net working capital can provide for the firm's cost and expenses

d. If the normal operating/working capital required for the firm's kind of business is one and half months, is the firm's working capital position good or bad? Explain your answer.

4. Visit two firms who are engage in different lines of business and interview them as to their working capital policy. Do they maintain the same or practically the same policy on working capital? What could be the reason or reasons for this?

Thank you and looking forward.

LESSON PLAN ACCOUNT RECEIVABLE MANAGEMENT SPECIFIC OBJECTIVES At the end of the lesson, you should be able to: DISCUSSION Accounts receivables arise out credit sales. The amount of investment in account receivables is determined largely by the nature of the business. A large grocery store, a department store or a drugstore would probably be selling on cash basis, while a construction supply store, lumber and hardware store would be probably be selling on cash basis, while a construction supply store, lumber and hardware store would probably sell on term basis. Consequently, the nature of the business tends to determine the proportion of credit sales. Allowing credit generally pushes up sales. Two prominent department stores, Shoe Mart and C.O.D.have credit cards that allow customers to purchase on credit, As a result their sales have increased tremendously. However, selling on credit has a corresponding cost. If sales were on cash basis, the cash can readily be invested somewhere and earn income. On the other hand, it may take from 15 to 60 days to collect obligations is not remote. Also, the handling of receivables such as sending of bills, collection letters, etc., involves additional cost. Hence, the grading of credit sales must be carefully considered against the prospective earning from sales. What then are the guidelines in extending credit sales? Firstly, whenever one extends credit, he/she expects it to be paid back. It does not make sense if one does not get paid for credit he/she extends. There are two main factors to consider in granting credit namely, \"willingness to pay \"and \"capacity to pay\". The two factors should always go together to one to collect payment on receivable. A person maybe very willing to pay, but he/she has no money with which to pay his/her obligation. Consequently, no collection will be forthcoming from such person. On the other hand,he/she maybe well off with plenty of money, but he does not want to pay for one reason or another. Similarly, no collection will be forthcoming from such person. The latter kind of debtor is worse than the firstbecause the \"willingness to pay\" reflects on the character of the debtor. If one is not willing to meet his/her obligation it would be extremely difficult to collect and usually this kind of situation ends in court case. The credit worthiness of a person maybe established through the so called credit investigation or C.I. for short. This is normally done by banks on their prospective borrowers, A credit investigator of the bank is assigned to undertake a credit inquiry about a prospective borrower. The idea is for the bank to more or less know the paying habit, the financial trained people who gather information about a prospective client. Credit investigators are especially trained people who gather information about a prospective bank client without the client's knowledge he is being investigated. The report by the credit investigator is forwarded to the loan officer of the bank who then evaluates it with the collateral and decide whether or not to favourably consider the loan applied for. In merchandising and similar business, the process of credit investigation may not be appropriate since they are not lending actual cash. What could be done, what could be done, if credit sales are prone to be granted, is to allow it on limited scale until the buyer has proven his/her credit worthiness. After the debtor has established his/her credit worthiness, the amount of credit maybe increased gradually until it culminates into the so-called \"open account\" meaning without credit limit. Accounts receivable must be properly managed because it is in a sense money loaned. One strategy is to have a reasonable credit policy and see to it that the policy is implemented. For instance, if the credit policy is to allow a 30-day credit, then payments or collections should be forthcoming within that 30-day period. Unfortunately, in the real business world this does not happen. For one reason or another, there will be defaults on accounting, accountants normally provide an allowance for bad debt on account receivable balance. Another way is to set certain percent of credit sales as allowance for bad debts. Still another way of setting up an allowance for bad debt is to arbitrarily set an amount base on previous years experience. Whatever way, an allowance for bad debts is normally set up because one cannot expect a 100% collection of his/her account receivables. NUMBER OF DAYS OF COLLECTION PERIOD How does one ascertain the number of days it takes to collect an account given the balance of the account receivable and credit sales? Well, one formula is to divide credit sales by 360 (assuming there are 360 days a year for expediency) thereby resulting in the credit sales. Thence, divide account receivable by the daily credit sales and the result is the average collection period. In formula form: Credit Sales 360 = Daily Credit Sales Accounts Receivable Daily Credit Sales = Average Collection Period The other way is to divide account receivable by credit sales and then multiply quotient by 360. Both formula will give the same answer. To illustrate: Credit Sales Accounts Receivable Ave.Collection period =P 3,600,000 P 350,000 P 10,000 P 3,600,000 350,000 P 10,000 daily = 35 daysaverage collection priod The other formula is: Ave. Collection period = P350,000 = .97222 x 360 = 35 days 3,600,000 Then next that should be asked is; Is the 35 days collection period \"good\" or \"bad\"? That question cannot be answered logically unless one knows the credit policy of the firm. If the credit term is 45 days, certainly 35 days is within the credit policy. If the credit policy is 15 days, the average collection period of 35 days is \"bad\" because it is beyond the credit policy. Another technique in managing receivable is to \"aged\" it or the so-called \"Aging of Receivables\". The idea is to segregate the current account from those that are past due. Moreover, the past due accounts can be categorized into 30-60 days, 61 120 days, 121-180 days, and so forth. As the collection of the receivables is prolonged the chances of collection become lesser. It may be necessary to hire a lawyer who can pursue the case in court, if necessary. CHANGING CREDIT POLICY As earlier mentioned, there is a high correlation between the volume of sales and credit policy. Supposing the firm has a mark up of 30%on cost. Also assume that past experiences indicate that bad debts represent 5% of credit sales. Now, supposing the firm proposes to liberalize its credit policy from 15 days to 30 days. And, with the liberalization of credit sales are expected to increase to P 5 million, should it go ahead with the plan? LEARNING ACTIVITY Answer the following: 1. Why should collection of receivables be handled properly? 2. Beta company proposes to improve its collection performance. It intends to increase its level of collection expenses from P150,000 to P250,000 on sales of P10 million. This move is expected to cut debt losses by one per cent. Also turnover of receivables is expected to increase from 10 to 12 times per year. Should the firm go ahead with its plan? Support your answer. LESSON PLAN INVENTORY MANAGEMENT SPECIFIC OBJECTIVES At the end of the lesson, you should be able to: 1. Understand the importance of inventory management 2. Determine the proper size of inventory 3. Perform the so called \"The ABC Method of Inventory Control\" DISCUSSION: Inventory is one of the largest items among the current assets or firms. There are three forms of inventory, namely raw materials inventory, goods-in-process inventory, and finished goods inventory. Raw materials inventory consists of basic materials acquired from others to be used in the manufacture or production of the firm final product Goods-in-Process inventory consists of partly processed goods, but not yet in finished form. Finished Goods Inventory consists of ready for sale finished goods for the firm. As earlier stated, inventory is one of the largest item among the current assets of the firm and, cost a substantial amount of money. The size of inventory should be carefully watched because having large amount of inventory means losing earnings on cash slashed in inventory which could have been invested elsewhere to generate income. On the other hand, a small size of inventory could result in lost opportunity for sale as production of required goods could be delayed on amount of unavailability of a necessary material. Therefore, there is a need to balance the required inventory. THE ORDER QUANTITY PROBLEM The order quantity problem deals with the determination of the optional order size of an inventory item given its expected usage, carrying costs and ordering costs. Carrying costs refer to the cost of maintaining the inventory like storage, insurance, interest on borrowed funds used to buy the goods, etc. While ordering costs refer to the expenses involved in making the order like, clerical expenses ,following up orders, etc. The Economic Order Quantity EOQ, method determines the size of the order that will minimize total inventory cost. Thus if the average inventory is Q and the carrying cost per unit is \"C\