Question

Commercial Supply Corp. bills its accounts on terms of​ 2/10 net 30. The​ firm's accounts receivable...

Commercial Supply Corp. bills its accounts on terms of​ 2/10 net 30. The​ firm's accounts receivable include​ $200,000 that has been outstanding for ten or fewer​days, $126,000 outstanding for 11 to 30​ days, $98,000 outstanding for 31 to 40​ days, $12,000 outstanding for 41 to 50​ days, $20,000 outstanding for 51 to 60​days, and​ $7,000 outstanding for more than 60 days. Is the aging schedule for Commercial Supply Corp. bottom​ heavy?

A. ​No, since the percentage of payments that are late are greater than the percentage of payments that are on time.

B. ​Yes, since the percentage of payments that are late are greater than the percentage of payments that are on time.

C. ​No, since​ 70% of the outstanding sales are on time and the percentage of long term outstanding payments is low.

D. Given information is not sufficient to reach any conclusion.

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Homework Answers

Answer #1

Aging schedule:

Days Outstanding Amount O/s Percentage O/s
11 -30 126,000 47.91%
31 - 40 98,000 37.26%
41 -50 12,000 4.56%
51 - 60 20,000 7.60%
60+ 7,000 2.66%
263,000 100.00%

The bottom being heavy means that if the lower half of the aging schedule has high percentage of outstanding. In the given case the lower half has a cumulative outstanding of 14.83% which is reasonable.

Option ,No, since​ 70% of the outstanding sales are on time and the percentage of long term outstanding payments is low.

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