Question

At​ year-end, Spring has cash of $ 11,000​, current accounts receivable of $ 20,000​, merchandise inventory of $ 35,200​, and prepaid expenses totaling $ 4,200. Liabilities of $ 40,000 must be paid next year. Assume accounts receivable had a beginning balance of $ 80,000 and net credit sales for the current year totaled $ 800,000. How many days did it take Spring to collect its average level of​ receivables?

Answer 1

Days to collect receivables = 22.812

Step-by-step explanation:

given data

cash = $ 11,000

current accounts receivable = $20,000

merchandise inventory = $35,200

prepaid expenses totaling = $4,200

Liabilities = $40,000

accounts receivable beginning= $ 80,000

net credit sales= $ 800,000

to find out

How many days did it take Spring to collect its average level of​ receivables

solution

we first get here Average Receivables that is

Average Receivables =
`(current \ Accounts \ receivable + Beginning \ Accounts \ receivable)/(2)`

Average Receivables =
`( 20000+80000)/(2)`

Average Receivables = 50000

and

now turnover will be here

turnover =
`(Net \ credit \ sales)/(Average \ Receivables)`

turnover =
`(800,000)/(50000)`

turnover = 16

so Days to collect receivables is

Days to collect receivables =
`(365)/(16)`

Days to collect receivables = 22.812

we consider here 365 days in a year