### McEwan Industries Credit AnalysisMcEwan Industries operates on credit terms of 3/10, net 35, and has total sales for the year amounting to $1,947,000. Of these customers, 40% pay on the 10th day to avail themselves of a discount, while the remaining 60% pay, on average, 74 days post-purchase. Ensure you use 365 days in your calculations for the following analyses:#### a. Days Sales Outstanding (DSO)Calculate the days sales outstanding and round your answer to two decimal places:- DSO: $ \_\_\_ $ days#### b. Average Amount of ReceivablesDetermine the average amount of receivables without rounding intermediate calculations. Round your final answer to the nearest cent:- Average Receivables: $$ \_\_\_ $#### c. Percentage Cost of Trade Credit for Discount TakersCalculate the percentage cost of trade credit for customers who avail themselves of the discount. If zero, enter zero, and round to two decimal places:- Percentage Cost: $ \_\_\_ \% $#### d. Percentage Cost of Trade Credit without DiscountDetermine the percentage cost of trade credit for those not taking the discount and paying in 74 days:- Nominal Cost: $ \_\_\_ \% $- Effective Cost: $ \_\_\_ \% $#### e. Impact of Collection Policy ChangeAnalyze the impact on accounts receivables if all non-discount customers paid on the 35th day, rounding your DSO to two decimal places and average receivables to the nearest cent:- DSO: $ \_\_\_ $ days- Average Receivables: $$ \_\_\_ $This exercise will help in understanding the implications of credit terms on cash flow and receivables management.

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Description: ### McEwan Industries Credit AnalysisMcEwan Industries operates on credit terms of 3/10, net 35, and has total sales for the year amounting to $1,947,000. Of these customers, 40% pay on the 10th day to avail themselves of a discount, while the remai

Hi student Since there are multiple subparts, we will answer only first three subparts. If you want remaining subparts to be answered, then please resubmit the question and specify the particular subpart to be answered. A cash discount is one of the methods of boosting sales for the business and in order to collect sales early. Credit terms 3/10, n/35 means that the customer will get a cash discount of 3% if payment is being made in 10 days. Otherwise, the full amount needs to be paid within 35 days. Days sales outstanding shows in how many days receivables of the business are collected.Solution a. Calculation of days sales outstanding = Days sales oustanding for customers who take discount + Days sales outstanding for customers who do not take discount = 10 ×40% + (74×60%) = 4 + 44.4 = 48.4 days Solution b. Average amount of receivables = (Total Sales/365) × Days sales outstanding = (1947000/365)×48.4 = $258,177.53 Solution c. As credit terms are 3/10, which means customer will get a discount of 3% within 10 days. If customers are making payment within discount period and getting discount, then there is no cost of trade credit which is being provided to them. So, cost of trade credit = 0%

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McEwan Industries sells on terms of 3/10, net 35. Total sales for the year are $1,947,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 74 days after their purchases. Assume 365 days in year for your calculations. a. What is the days sales outstanding? Round your answer to two decimal places. days b. What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest cent. c. What is the percentage cost of trade credit to customers who take the discount? If your answer is zero, enter zero. Round your answer to two decimal places.

McEwan Industries sells on terms of 3/10, net 35. Total sales for the year are $1,947,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 74 days after their purchases. Assume 365 days in year for your calculations. a. What is the days sales outstanding? Round your answer to two decimal places. days b. What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest cent. c. What is the percentage cost of trade credit to customers who take the discount? If your answer is zero, enter zero. Round your answer to two decimal places.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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