P5.7 A restaurant has been in operation for the past five years and has suc- cessfully increased its revenue each year. One of the reasons is that in the third year the owner began extending credit to local businesspeople who regularly used the restaurant. They were allowed to sign their sales checks and were then sent an invoice at each month-end. The owner is concerned that this credit policy may have led to increases in losses from increases in revenue. The restaurant operates at a 60 percent gross profit bad debts (uncollectable accounts receivable) that were not justified by ratio, and other operating expenses (not including bad debts) are 50 per- cent of revenue. Following are the credit revenue and bad debt figures for the past five years: Bad Debts Year Credit Revenue 1 $ 960 900 3,840 4,500 5,400 $160,000 180,000 240,000 300,000 360,000 3 4. 5 In a columnar schedule for each year, record the credit revenue, cost of sales, gross profit, operating expenses, income before bad debts, bad debts, and net income. In addition, for each year, calculate the bad debts as a percentage of charge or credit revenue. Write a brief report to the owner with particular reference to control over bad debt losses and the restaurant's credit policy