Question

Universal Exports Inc. has a very attractive credit policy, and none of its customers pays in cash when the firm makes a sale. Universal Exports Inc. sells to its customers on credit terms of 3/10, net 30. If a customer bought $100,000 worth of goods and paid the firm cash eight days after the sale, how much cash would Universal Exports Inc. get from the customer? $92,500 $90,000 $97,000 $85,000 If the customer paid off the account after 15 days, Universal Exports Inc. would receive . Approximately 35% of Universal Exports Inc.’s customers take advantage of the discount and pay on the 10th day. The remaining 65% take an average of 35 days to pay off their accounts. What is Universal Exports Inc.’s days sales outstanding (DSO), or the average collection period? 23.63 days 26.25 days 24.94 days 31.50 days

Answer 1

$97,000 ; 26.25 days

Step-by-step explanation:

The computations are shown below:

1. The cash collected would be

= Sale value of goods × (1 - discount rate)

= $100,000 × (1 - 3%)

= $100,000 × 0.97

= $97,000

2. The days sales outstanding would be

= Number of days for advantage × advantage percentage + remaining percentage × average days to pay off their accounts

= 10 days × 35% + (1 - 0.35) × 35 days

= 3.5 days + 22.75 days

= 26.25 days