Table 15.6
A breakdown of Teffan, Inc.'s outstanding accounts receivable dated June 30, 2014 on the basis of the month in which the credit sale was initially made follows. The firm extends 30-day credit terms.
-A decrease in collection efforts by a firm will result in ________ in sales volume, ________ in the investment in accounts receivable, ________ in bad debt expenses, and ________ in collection expenditures.
A) an increase; an increase; an increase; a decrease
B) an increase; a decrease; an increase; an increase
C) an increase; a decrease; an increase; a decrease
D) a decrease; a decrease; a decrease; an increase

Question

Table 15.6
A breakdown of Teffan, Inc.'s outstanding accounts receivable dated June 30, 2014 on the basis of the month in which the credit sale was initially made follows. The firm extends 30-day credit terms. 
-A decrease in collection efforts by a firm will result in ________ in sales volume, ________ in the investment in accounts receivable, ________ in bad debt expenses, and ________ in collection expenditures.
A) an increase; an increase; an increase; a decrease 
B) an increase; a decrease; an increase; an increase 
C) an increase; a decrease; an increase; a decrease 
D) a decrease; a decrease; a decrease; an increase

Quizplus · Accepted Answer

A decrease in collection efforts typically leads to an increase in sales volume because less stringent credit policies can attract more customers. However, this also results in an increase in the investment in accounts receivable, as more sales on credit lead to higher outstanding receivables. Bad debt expenses are likely to increase because with less emphasis on collections, the likelihood of defaults rises. Collection expenditures decrease because the firm is putting less effort and resources into collecting outstanding debts.

Table 15.6 A Breakdown of Teffan, Inc.'s Outstanding Accounts Receivable Dated June