Question

CMS Energy Corp has an operating cycle of 157 days. The firm's days' sales in inventory is 87 days. How much does the firm have in receivables if it has credit sales of $600,000?

a. $126,922
b. $115,068
c. $81,171
d. $195,183

Answer 1

b. $115,068

Step-by-step explanation:

The computation of the receivables is shown below:

As we know that

operating cycle = days sale of inventory + days sales outstanding

157 days = 87 days + days sales outstanding

So,

credit days is

= 157 days - 87 days

= 70 days

Now

receivables is

= $600,000 × 70 ÷ 365

= $115,068

Therefore the correct option is second