A supply company, sells on terms of3/10, net 30. Gross sales for the year are $1,200,000 and thecollections department estimates that 30% of the customers pay onthe tenth day and take discounts, 40% pay on the thirtieth day, andremaining 30% pay, on average, 40 days after the purchase. (Assume360 days /year.)
1. Calculate the firm's average collection period.
2. Calculate the firm's current receivables balance.
3. Calculate the firm's new receivables balance if the company toughened up on its collection policy, with the result that all non-discount customers paid on the30th day.