A firm's credit terms specify "1/10 net 30" and the accounts receivable days outstanding is 32 days.Which of the following can be concluded on the basis of this information?
A)Most customers pay on time.
B)The average customer pays two days late.
C)All customers have paid within 32 days of purchase.
D)All customers pay late.
E)No customers have paid within 32 days of purchase.

Question

Quizplus · Accepted Answer

The credit terms of "1/10 net 30" means that customers who pay within 10 days receive a 1% discount, but the full amount is due within 30 days.

Since the accounts receivable days outstanding is 32 days, it implies that the average customer is paying 32-30=2 days late. Therefore, option B is the correct choice.

Option A cannot be concluded as we do not have information about how many customers are paying on time.

Option C cannot be concluded as the average days outstanding is 32, so some customers may have paid later than 32 days.

Option D is not accurate as it suggests that all customers pay late which is not true.

Option E cannot be concluded as the information only gives us the average days outstanding and not information about individual customers.

A Firm's Credit Terms Specify "1/10 Net 30" and the Accounts