Refer to the opening feature about BigBadToyStore. Assume thatJoel Boblit reports current annual sales at approximately $10million and discloses the following income statement.

BigBadToyStore

IncomeStatement

For Year Ended January 31, 2008

Net sales $ 10,000,000

Cost of sales. 6,100,000

Expenses(other than cost ofsales) 2,000,000

Net income 1,900,000

Joel Boblit sells to various individuals and retailers, rangingfrom small shop to larage chain. Assume that Joel currently offerscredit terms of 1/15, n/60, and ships FOB destination. To improvehis cash flow, Joel is considering changing his credit terms to3/10, n/30. In addition, he proposes to change his cash shippingterms to FOB shipping point. He expects that the increase indiscount rate will increase his net main unchanged. He also expectsthat his delivery expenses will be zero under this proposal; thus,his expenses other than cost of sales are expected to increase only6%.

Required

1. Prepare a forecastedincome statement for the year ended January 31, 2009, based on theproposal.

2. Based on the forcastedincome statement the new sales policies? Explain.

3. What else should Joelconsider before he decides whether or not to implement the newpolicies? Explain.