Question

In: Accounting

How many days' sales are in Amicable's accounts receivable?

Amicable Wireless, Inc. offers credit terms of 2/10, net 30 for its customers. Sixty percent of Amicable's customers take the 2% discount and pay on day 10. The remainder of Amicable's customers pay on day 30. How many days' sales are in Amicable's accounts receivable?

Solutions

Expert Solution

Days' sales = Ending accounts receivable / Average daily sales

That formula will not work in this case because the necessary information is not provided. However, enough information about payments is provided so that the total days' sales can be determined on a weighted average basis. In this question, nobody pays before the 10th day and 60% of the customers pay on the 10th day, so there are 10 × 0.60, or 6 day's sales there. The other 40% of the customers pay on the 30th day so there are 30 × 0.40, or 12 day's sales there. The total is 18 days sales.


The total is 18 days sales.

Related Solutions