Question

Based on the following data for the current year, what is the number of days' sales in accounts receivable? Net sales on account during year $584,000 Cost of merchandise sold during year 300,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 90,000 Inventory, end of year 110,000

Answer 1

Answer:

25 Days

Explanation:

Average Account receivables:

= (Accounts receivables, beginning of year + Account receivables, end of year) ÷ 2

= (45,000 + 35,000) ÷ 2

= 40,000

Account Receivables Turnover = Net Sales on Account ÷ Average Account Receivables  

Account Receivables Turnover = 584,000 ÷ 40,000

                                                    = 14.6 times

No. of Days Sales in Accounts Receivables:

= No. of Days in a year ÷ Account Receivables Turnover

= 365 ÷ 14.6

= 25 Days