Question

At​ year-end, Sample has cash of $ 14,000​, current accounts receivable of $ 70,000​, merchandise inventory of $ 42,000​, and prepaid expenses totaling $ 5,300. Liabilities of $ 20 comma 000 must be paid next year. Assume accounts receivable had a beginning balance of $ 10 comma 000 and net credit sales for the current year totaled $ 560 comma 000. How many days did it take Sample to collect its average level of​ receivables?

Answer 1

Days to collect receivables = 26 days

Step-by-step explanation:

At the start Accounts Receivable = $10,000

Ending Accounts Receivable = $70,000

Credit Sales = $560,000

Average Accounts Receivable = ($10,000 + $70,000) / 2

Average Accounts Receivable = $40,000

Accounts Receivable Turnover = Credit Sales / Average Accounts Receivable

Accounts Receivable Turnover = $560,000 / $40,000

Accounts Receivable Turnover = 14

Days to collect receivables = 365 / Accounts Receivable Turnover

Days to collect receivables = 365 / 14

Days to collect receivables = 26 days