Question

If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

Answer 1

The number of days' sales in accounts receivable for a firm with payment terms of 2/10, n30 can be calculated by assuming all customers take the discount.

Step-by-step explanation:

The payment terms 2/10, n30 mean that customers can take a 2% discount if they pay within 10 days, otherwise, they need to pay the full amount within 30 days.

To calculate the number of days' sales in accounts receivable, we need to consider how many customers take the discount and pay within 10 days, and how many customers pay the full amount within 30 days. Let's assume that all customers take the discount:

Days' sales in accounts receivable = (10 days/365 days) x 100% = 2.74%