Snider Industries sells on terms of 3/10, net 35. Total sales for the year are $

Question

Snider Industries sells on terms of 3/10, net 35. Total sales for the year are $1,356,000. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 62 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 35th day? Round your answer to the nearest dollar.
$

Explanation / Answer

Days sales outstanding = Accounts receivable / Net credit sales * 365 Accounts receivable = 1356000/365 *62 = 230334.25 Net credit sales = 1356000 * 70% = 949200 Days sales outstanding = 230334.2/949200 * 365      = 88.6 Average amount of receivables = 230334 Average receivable =1356000/365*35 = 130027 Hence, if the collection policy is tiughened , the average receivables will decline

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