Which of the Following Statements Is Correct

question 69

Multiple Choice

Which of the following statements is correct?

• A) If a firm's volume of credit sales declines,then its DSO will also decline.
• B) If a firm changes its credit terms from 1/20,net 40 days,to 2/10,net 45 days,the impact on sales can't be determined because the increase in the discount is offset by the longer net terms which tends to reduce sales.
• C) The DSO of a firm with seasonal sales can vary because while the sales per day figure is usually based on the total annual sales,the accounts receivable balance will be high or low depending on the season.
• D) An aging schedule is used to determine what portion of customers pay cash and what portion buy on credit.
• E) Aging schedules can be constructed from the summary data provided in the firm's financial statements.

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Definitions:

FICA Taxes Withheld

The portion of social security and Medicare taxes that employers deduct from employees' wages and salaries.

Net Payroll

The total amount of wages payable to employees after deductions such as taxes and benefits.

Salaries And Wages Payable

Liabilities representing amounts owed by an employer to its employees for work performed but not yet paid.

FICA Taxes Withheld

The part of wages that are taken out for Social Security and Medicare, as required by the Federal Insurance Contributions Act.