Question

The following information is taken from Reagan Company's December 31 balance sheet: Cash and cash equivalents $ 9,219 Accounts receivable 74,422 Merchandise inventories 64,362 Prepaid expenses 4,900 Accounts payable $ 15,750 Notes payable 90,638 Other current liabilities 10,300 If net sales for the current year were $607,500, the firm's days' sales uncollected for the year is: (Use 365 days a year.)

Answer 1

Answer:

The correct answer is 44.73 days or 45 days.

Explanation:

According to the scenario, the computation of the given data are as follows:

We can calculate the day's sales uncollected by using following formula:

Day's sales uncollected = No. of days in year ÷ Debtor turnover ratio

Where, Debtor turnover ratio = Sales ÷ Accounts receivable

= $607,500 ÷ $74,422

= 8.16

So, by putting the value, we get

Day's sales uncollected = 365 days ÷ 8.16

= 44.73 days or 45 days.