Question

Snider Industries sells on terms of 2/10, net 45. Total sales for the year are $800,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases. Assume a 365-day year. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number. days What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 45th day? Do not round intermediate calculations. Round your answer to the nearest dollar. $

Answer 1

The days sales outstanding (DSO) is 0.104 days and the average amount of receivables is $226,849. If Snider toughens its collection policy to all nondiscount customers paying on the 45th day, the DSO would be 0.095 days and the average receivables would be $207,671.

Step-by-step explanation:

The days sales outstanding (DSO) can be calculated using the formula:

DSO = [(30% × 10) + (70% × 50)] / 365

Plug in the values:

DSO = [(30% × 10) + (70% × 50)] / 365
= [3 + 35] / 365
= 38 / 365
= 0.104

Now, to find the average amount of receivables, we can use the formula:

Average Receivables = (DSO × Annual Sales) / 365

Plug in the values:

Average Receivables = (0.104 × $800,000) / 365
= $226.849

If Snider toughens its collection policy and all nondiscount customers pay on the 45th day, the new DSO can be calculated as:

DSO = [(30% × 10) + (70% × 45)] / 365
= [3 + 31.5] / 365
= 34.5 / 365
= 0.095

Using the formula for average receivables, the new average receivables would be:

Average Receivables = (0.095 × $800,000) / 365
= $207,671

Answer 2

Days sales outstanding =256 days

Average accounts receivable = $109589

Average accounts receivable = $ 98630 would decrease

Step-by-step explanation:

days sales outstanding = accounts receivables / average sales per day

= (800000*0.7)/ (800000/365)

= 560000/ 2191.780822

= 255.5 days

days outstanding collection = (average accounts receivables / credit sales)*356

50 days / 365= average receivables / 800000

0.1369863014 *800000= average receivables

average receivables = 109589.0411

using same formula

days outstanding collection = (average accounts receivables / credit sales)*356

45 days /365 = average receivables / 800000

average receivables= 0.1232876712*800000 = 98630.13699