Heaton Corp.sells on terms that allow customers 45 days to pay for merchandise.Its sales last year were $425,000,and its year-end receivables were $60,000.If its DSO is less than the 45-day credit period,then customers are paying on time.Otherwise,they are paying late.By how much are customers paying early or late? Base your answer on this equation: DSO - Credit period = days early or late,and use a 365-day year when calculating the DSO.A positive answer indicates late payments,while a negative answer indicates early payments.
A)6.20
B)6.53
C)6.86
D)7.20

Question

Quizplus · Accepted Answer

DSO (Days Sales Outstanding) is calculated as (Year-end receivables / Sales) * 365. Here, it's ($60,000 / $425,000) * 365 = 51.47 days. Subtracting the credit period of 45 days from the DSO gives 51.47 - 45 = 6.47 days. Since 6.53 is the closest option, it indicates customers are paying slightly late.