roblem 16-6 Receivables Investment Snider Industries sells on terms of 3/10, net
ID: 2717865 • Letter: R
Question
roblem 16-6
Receivables Investment
Snider Industries sells on terms of 3/10, net 20. Total sales for the year are $934,500. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 36 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.
$
What would happen to average receivables if Snider toughened up on its collection policy with the result that all nondiscount customers paid on the 20th day? Round your answer to the nearest dollar.
$
Explanation / Answer
Total Sales = $934500
Accounts Receivable = 70% of 934500 = $654150
Days Sales Outstanding = Accounts Receivable / Total Credit Sales * No. of days
= 654150/934500 * 365 = 255.5 days
Average amount of receivables = Accounts receivables / Days outstanding sales
= 654150/255.5
= $2560 per outstanding day
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