Collins Office Supplies is considering a more liberal credit policy to increase

sales, but expects that 9 percent of the new accounts will be uncollectible. Collection
costs are 5 percent of new sales, production and selling costs are 78 percent,
and accounts receivable turnover is five times. Assume income taxes of
30 percent and an increase in sales of $80,000. No other asset buildup will be
required to service the new accounts.

To determine the impact of Collins Office Supplies implementing a more liberal credit policy on their financials, we need to analyze the different components involved.

1. Uncollectible accounts: It is expected that 9 percent of the new accounts will be uncollectible. To calculate the amount of uncollectible accounts, you multiply the expected percentage by the increase in sales.

Uncollectible accounts = 9% * $80,000

2. Collection costs: Collection costs are estimated to be 5 percent of new sales. To calculate the collection costs, you multiply the percentage by the increase in sales.

Collection costs = 5% * $80,000

3. Production and selling costs: Production and selling costs are estimated to be 78 percent of new sales. To calculate the production and selling costs, you multiply the percentage by the increase in sales.

Production and selling costs = 78% * $80,000

4. Accounts receivable turnover: The accounts receivable turnover is given as five times. This indicates that the accounts receivable balance is collected and renewed five times during the year. To calculate the average accounts receivable balance, divide the total credit sales by the turnover ratio.

Average accounts receivable balance = ($80,000 / 5)

5. Bad debt expense: The bad debt expense is the expected amount of uncollectible accounts, taking into account the accounts receivable turnover. To calculate the bad debt expense, multiply the average accounts receivable balance by the percentage of uncollectible accounts.

Bad debt expense = (Average accounts receivable balance * Uncollectible accounts)

6. Net sales: Net sales are calculated by subtracting the bad debt expense and collection costs from the total sales.

Net sales = $80,000 - Bad debt expense - Collection costs

7. Income taxes: Income taxes are estimated at 30 percent of the net income. To calculate the income tax, multiply the net income by the tax rate.

Income tax = 30% * Net income

To calculate the final impact on sales, subtract the collection costs, production and selling costs, and income tax from the net sales.

Final impact on sales = Net sales - Collection costs - Production and selling costs - Income tax

By following these steps and substituting the given values, you can determine the impact of the more liberal credit policy on sales for Collins Office Supplies.