Han Corp's sales last year were $440,000, 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. Assume all sales to be on credit. Do not round your intermediate calculations.

Question

Business

Brennen Rangel

2 September, 04:10

Han Corp's sales last year were $440,000, 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. Assume all sales to be on credit. Do not round your intermediate calculations.

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Answers (1)

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Tia Hodge · Answer 1

14 days

Explanation:

The formulas and the calculations are shown below:

Accounts receivable turnover ratio = Credit sales : average accounts receivable

= $440,000 : $52,500

= 8.38 times

Average collection period in days = Total number of days in a year : accounts receivable turnover ratio

= 365 days : 8.38 times

= 44 days

So, the delay payment = 44 days - 30 days = 14 days