Question

. Han Corp's sales last year were $440,000, and its year-end receivables were $52,500. The firm sells on terms that call for customers to pay 30 days after the purchase, but some delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO – Allowed credit period = Average days late, and use a 365-day year when calculating the DSO. Assume all sales to be on credit. Do not round your intermediate calculations. a. 11.65 b. 12.74 c. 12.33 d. 13.55 e. 15.58

Answer 1

d. 13.55

Step-by-step explanation:

For computing the how many days are late, first we have to determine the account receivable turnover ratio and then DSO which are shown below:

Account receivable turnover ratio = Net credit sales ÷ Average accounts receivable

= $440,000 ÷ $52,500

= 8.38 times

Now the DSO would be

= Total number of days in a year ÷ Accounts receivable turnover ratio

=365 days ÷ 8.38

= 43.55 days

So, the days late would be

= 43.55 days - 30 days

= 13.55 days