A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40. APP always takes the discount, but takes the full 15 days to pay its bills. What is the average accounts payable for APP?
McDonald Industries sell on terms of 3/10, net 30. Total sales for the year are $912,000. Forty percent of the customers pay on the 10th day and take discounts; the other 60 percent pay, on average, 40 days after their purchases.
A. What is the day's sale outstanding?
B. What is the average amount of receivables?
C. What would happen to average receivables if McDowell toughened up on its collection policy with the results that all nondiscount customers paid on the 30th day?
Computations shown for you.