Problem:

XYZ Inc. sells on terms of 2/10, net 30. Total sales for the year are $1,000,000. Consider 30 percent of the customers take discounts and pay on the 10th day, while the other 70 percent pay, on average, 45 days after their purchases.

Required:

Question 1: What is the days' sale outstanding?

Question 2: Determine the average amount of receivables.

Question 3: For the customers who take the discount, what is the percentage cost of trade credit?

Question 4: For the customers who do not take the discount and pay in 45 days, what is the percentage cost of trade credit?

Question 5: What would happen to XYZ's account receivable if it created a new collection policy that required all non-discount customers to pay on the 30th day?

Please provide step by step solution.