THIS IS MY 3rd TIME POSTING THIS QUESTION, IF YOU CAN\'T ANWER ALL ALL ALL QUEST
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Question
THIS IS MY 3rd TIME POSTING THIS QUESTION, IF YOU CAN'T ANWER ALL ALL ALL QUESTIONS, LET SOMONE ELSE ANSWER. I CANNOT DO THIS BY MYSELF, PLEASE PLEASE ANSWER ALL QUESTIONS AND MAKE SURE YOU KNOW WHAT YOU ARE DOING. THANK YOU
McDowell Industries sells on terms of 3/10, net 20. Total sales for the year are $1,256,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 80 days after their purchases. Assume 365 days in year for your calculations.
What is the days' sales outstanding? Round your answer to two decimal places.
days
What is the average amount of receivables? Round your answer to the nearest cent.
$
What is the percentage cost of trade credit to customers who take the discount? Round your answer to two decimal places.
%
What is the percentage cost of trade credit to customers who do not take the discount and pay on Day 80? Round your answers to two decimal places.
Nominal cost: %
Effective cost: %
What would happen to McDowell’s accounts receivables if McDowell toughened up on its collection policy with the result that all nondiscount customers paid on the 20th day? Round your answers to two decimal places.
DSO = days
Average receivables = $
Explanation / Answer
What is the days' sales outstanding? Round your answer to two decimal places.
Answer:0.40(10)+0.60(80)=52 day
What is the average amount of receivables? Round your answer to the nearest cent.
Answer: $1,256,500/365 days=$3442.465 sales per day
=$3442.465*52 day=$179008.18 Accounts receivable
What is the percentage cost of trade credit to customers who take the discount? Round your answer to two decimal places.
Answer:Customers who take discount: Free trade credit.
Customers who do not take the discount and pay on Day 20:
Nominal cost: 3/97 * 365/10 = 112.88%
Effective cost: (1 + 3/97)365/10 – 1 = 203.97%
Customers who do not take the discount and pay on Day 40:
Nominal cost: 3/97 * 365/30 = 37.63%
Effective cost: (1 + 3/97)365/30 – 1 = 44.86%
What is the percentage cost of trade credit to customers who do not take the discount and pay on Day 80? Round your answers to two decimal places.
Answer:
Customers who do not take the discount and pay on Day 80:
Nominal cost: 3/97 * 365/70 = 16.13%
Effective cost: (1 + 3/97)365/70 – 1 =17.2130 %
What would happen to McDowell’s accounts receivables if McDowell toughened up on its collection policy with the result that all nondiscount customers paid on the 20th day? Round your answers to two decimal places.
Answer: 0.4(10) + 0.8(20) = 20 days
$1,256,500/365 days=$3442.465 sales per day
=$3442.465*20 day=$68849.3 Accounts receivable
Sales may decline as a result of tightened credit. This would reduce receivables even more so. Some customers may also take discounts further reducing receivables.
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