question archive Receivables Investment Snider Industries sells on terms of 2/10, net 35
Receivables Investment Snider Industries sells on terms of 2/10, net 35
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Receivables Investment Snider Industries sells on terms of 2/10, net 35. Total sales for the year are $900,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 40 days after their purchases. Assume a 365- day year. a. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number. days b. What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar. $ c. What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 35th day? Do not round intermediate calculations. Round your answer to the nearest dollar. $
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Question a)
30% customers pay on 10th day and 70% customers pay on 40th day
Days sales outstanding = (10 * 30%) + (40*70%) = 3 + 28 = 31 Days
Question b)
Annual Sales = $900,000
Average Receivables = Sales per day * Days sales outstanding
= $900000 / 365 * 31 = $76,438
Question c)
30% customers pay on 10th day and 70% customers pay on 35th day
Days sales outstanding = (10 * 30%) + (35*70%) = 3 + 24.5 = 27.5 Days
Annual Sales = $900,000
Average Receivables = Sales per day * Days sales outstanding
= $900000 / 365 * 27.5 = $67,808
