Question

The 2016 income statements of Leggett & Platt, Inc. report net sales of $3,749.9 million. The balance sheet reports accounts receivable, net of $486.6 million at December 31, 2016 and $520.2 million at December 31, 2015. The days sales outstanding in 2016 was:
A. 49 days
B. 10 days
C. 44 days
D. 8 days
E. None of the above

Answer 1

Answer:

option (A) 49 days

Explanation:

Data provided:

Net sales = $3,749.9 million

Accounts receivable on December 31, 2016 = $486.6 million

Accounts receivable on December 31, 2015 = $520.2 million

Now,

The duration from December 31, 2015 to December 31, 2016 = 365 days

Days sales outstanding = $\frac{\textup{Average accounts receivable}}{\textup{Credit sales}}\times Number of days$

or

Days sales outstanding = $\frac{\frac{\ 486.6 + \ 520.2}{2}\textup{million}}{\ \textup{3,749.9 million}}\times365$

or

Days sales outstanding = $\frac{\ \textup{503.4 million}}{\ \textup{3,749.9 million}}\times365$

or

Days sales outstanding = 48.99 ≈ 49 days

Hence,

The correct answer is option (A) 49 days