Problem 15-5 Receivables investment McDowell Industries sells on terms of 3/10,
ID: 2612824 • Letter: P
Question
Problem 15-5
Receivables investment
McDowell Industries sells on terms of 3/10, net 30. Total sales for the year are $1,086,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 56 days after their purchases. Assume 365 days in year for your calculations.
1-What is the days' sales outstanding? Round your answer to two decimal places.
in days???
2.What is the average amount of receivables? Round your answer to the nearest cent. $
3.What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places.in %
4.What is the percentage cost of trade credit to customers who do not take the discount and pay on Day 56? Round your answers to two decimal places.
Nominal cost: %
Effective cost: %
Explanation / Answer
Average amount of receivable Sales 1086000 40% 434400 After dicount of 3% 421368 Balance 60% 651600 Average amount received 1072968 Cost of trade credit 13032 = 13032/434400 = 3 3%