McEwan Industries sells on terms of 3/10, net 40. Total sales for the year are $1,912,500; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 66 days after their purchases. Assume 365 days in year for your calculations. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. a. What is the days sales outstanding? Round your answer to two decimal places. 43.6 $ b. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations. 228,452 days c. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places. 3.09 %

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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**McEwan Industries Transaction Analysis**

McEwan Industries sells on terms of 3/10, net 40. Total sales for the year amount to $1,912,500. Of the customers, 40% pay on the 10th day and take discounts, while the remaining 60% pay, on average, 66 days after their purchases. Assume a 365-day year for your calculations. The data has been collected in a Microsoft Excel Online file. Use the spreadsheet to perform the required analysis for the following questions.

**Questions and Answers:**

a. **What is the days sales outstanding?**  
   Round your answer to two decimal places.  
   **Answer:** 43.6 days ✅

b. **What is the average amount of receivables?**  
   Round your answer to the nearest cent. Do not round intermediate calculations.  
   **Answer:** $228,452 ✅

c. **What is the percentage cost of trade credit to customers who take the discount?**  
   Round your answers to two decimal places.  
   **Answer:** 3.09% ❌

This analysis helps understand the efficiency of receivables collection and the cost implications of offering early payment discounts.
Transcribed Image Text:**McEwan Industries Transaction Analysis** McEwan Industries sells on terms of 3/10, net 40. Total sales for the year amount to $1,912,500. Of the customers, 40% pay on the 10th day and take discounts, while the remaining 60% pay, on average, 66 days after their purchases. Assume a 365-day year for your calculations. The data has been collected in a Microsoft Excel Online file. Use the spreadsheet to perform the required analysis for the following questions. **Questions and Answers:** a. **What is the days sales outstanding?** Round your answer to two decimal places. **Answer:** 43.6 days ✅ b. **What is the average amount of receivables?** Round your answer to the nearest cent. Do not round intermediate calculations. **Answer:** $228,452 ✅ c. **What is the percentage cost of trade credit to customers who take the discount?** Round your answers to two decimal places. **Answer:** 3.09% ❌ This analysis helps understand the efficiency of receivables collection and the cost implications of offering early payment discounts.
**d. What is the percentage cost of trade credit to customers who do not take the discount and pay in 66 days? Round your answers to two decimal places. Do not round intermediate calculations.**

- Nominal cost: 3.09%
- Effective cost: 17.02%

**e. What would happen to McEwan’s accounts receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 40th day? Round your answers to two decimal places. Do not round intermediate calculations.**

- DSO = 17.54 days
- Average receivables = $228,768.49
Transcribed Image Text:**d. What is the percentage cost of trade credit to customers who do not take the discount and pay in 66 days? Round your answers to two decimal places. Do not round intermediate calculations.** - Nominal cost: 3.09% - Effective cost: 17.02% **e. What would happen to McEwan’s accounts receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 40th day? Round your answers to two decimal places. Do not round intermediate calculations.** - DSO = 17.54 days - Average receivables = $228,768.49
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