Reston Inc. has expected sales of $17,000,000. While 10 percent of its customers pay cash, the remaining 90 percent pay on credit with 40 percent paying on Day 10, 30 percent paying on Day 20, 15 percent paying on Day 25, and 15 percent paying on Day 30. Which of the following is Reston's days sales outstanding (DSO)?

Question

Quizplus · Accepted Answer

Total credit sales= $17,000,000*(90%)= $15,300,000
Days to collect the payment= (40%*10)+(30%*20)+(15%*25)+(15%*30)= 4+6+3.75+4.5= 18.25 days
DSO= (Accounts Receivable/Total credit sales)*Number of days
Since all customers are either cash or pay on credit, accounts receivable= $0
Thus, DSO= (0/15,300,000)*18.25= 0 days