Question

Han Corp's sales last year were $425,000, and its year-end receivables were $52,500. The firm sells on terms that call for customers to pay 30 days after the purchase, but some delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO - Allowed credit period = Average days late, and use a 365-day year when calculating the DSO.a. 12.94b. 13.62c. 14.33d. 15.09e. 15.84

Answer 1

Answer:

d. 15.09

Explanation:

425,000 sales

52,500 AR

year of 365 days

Days Sales Outstanding

$\frac{52,500}{425,000}\times 365 = 45.088 = 45.09$

Average days late

$Days \: Sales \: Outstanding - \: Allowed \: credit \: period = average \: days \: late$

45.09 - 30 = 15.09

in average customer pays within 45 days.

That is 15.09 days above the allowed credit period.