Question

Snider Industries sells on terms of 3/10, net 35. Total sales for the year are $680,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 40 days after their purchases. Assume 365 days in year for your calculations. What is the days sales outstanding? Round your answer to one decimal place. days

What is the average amount of receivables? Round your answer to the nearest dollar. Do not round intermediate calculations. $

What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 35th day? Round your answer to the nearest dollar. Do not round intermediate calculations.

Answer 1

1. Days Sales Outstanding = 70%*40 + (1-70%)*10 = 31
Average amount of receivables = Accounts Receivable = DSO*(Sales/365) = 31*($680,000/365) =  57,753.42 or 57753

2.. If non discount customers paid on 35th day then
Days Sales Outstanding = 70%*35 + (1-70%)*10 = 27.50
Average amount of receivables = Accounts Receivable = DSO*(Sales/365) = 27.50*($680,000/365)= 51232.88 or 51233