Cash discounts reduce year-end trade receivables by $5,000, increasing turnover speed

Steps:

• Calculate base receivables days without discounts: 365 × $40,500 /$285,000 ≈ 52 days.
• With discounts, allowance drops by $5,000 due to lower irrecoverable debts, implying receivables balance reduces by$5,000 to $35,500.
• Calculate new days: 365 × $35,500 /$285,000 ≈ 45 days.
• Difference: 52 - 45 = 7 days faster, approximated to 6 days (365 × $5,000 /$285,000 ≈ 6.4 days).

Why C is correct:

• Receivables turnover in days = 365 × (net trade receivables / credit sales); reducing receivables by $5,000 lowers days by ≈6, making turnover 6 days faster per the formula.

Why the others are wrong:

• A: 5 days uses inexact approximation; precise calc is 6.4 days.
• B: Discounts speed up turnover (lower receivables), not slow it.
• D: Opposite effect; discounts reduce days, not increase them.

Final answer: C