Your sister operates Harbor Ready Parts Company, an online boat parts distributorship that is in its third year of operation. The income statement is shown below and was recently prepared for the year ended October 31, 20Y6.

Your sister is considering a proposal to increase net income by offering sales discounts of 2/15, n/30 and by shipping all merchandise FOB shipping point. Currently, no sales discounts are allowed and merchandise is shipped FOB destination. It is estimated that these credit terms will increase sales by 15%. The ratio of the cost of goods sold to sales is expected to be 65%. All selling and administrative expenses are expected to remain unchanged, except for store supplies, miscellaneous selling, office supplies, and miscellaneous administrative expenses, which are expected to increase proportionately with increased sales. The amounts of these preceding items for the year ended October 31, 20Y6, were as follows:
Store supplies expense.................$18,000.....Office supplies expense................$4000
Miscellaneous selling expense..........5,000....Miscellaneous administrative expense..2000
The other revenue and other expense items will remain unchanged. The shipment of all merchandise FOB shipping point will eliminate all delivery expenses, which for the year ended October 31, 20Y6, were $28,000.
1. Prepare a projected single-step income statement for the year ending October 31, 20Y7, based on the proposal. Assume all sales are collected within the discount period.
2. Based on the projected income statement in part (1), would you recommend implementation of the proposed changes?
3. Describe any possible concerns you may have related to the proposed changes described in part (1).

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HARBOR READY PARTS COMPANY Income Statement For the Year Ended October 31, 20Y6 Revenues: Sales $1,200,000 15,000 $1,215,000 Total revenues.... Expenses Cost of goods sold. 75,000 21,650 Interest expense. 1,031,650) 183,350 Net income