Question

Harper Corp.'s sales last year were $395,000, and its year-end receivables were $42,500. Harper sells on terms that call for customers to pay 30 days after the purchase, but many 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.

Answer 1

Answer:

9 average days late

Explanation:

Days Sales Outstanding - Allowed credit period = average days late

Days Sales Outstanding

$\frac{Account \: Receivable}{Sales} \times 365 = DSO$

$\frac{42,500}{395,000} \times 365 = DSO$

DSO = 38.81012658 = 39 days

Days Sales Outstanding - Allowed credit period = average days late

39 - 30 = 9 average days late