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Problem Walk-Through

Receivables Investment

Snider Industries sells on terms of 2/10, net 25. 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, 30 days after their purchases. Assume a 365-day year.

1. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number.

   days

2. What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar.

   $

3. What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 25th day? Do not round intermediate calculations. Round your answer to the nearest dollar.

   $