Question

A company has net credit sales of​ $1,200,000, beginning net accounts receivable of​ $290,000, and ending net accounts receivable of​ $201,000. What is the​ days' sales in accounts​ receivable? (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest whole​ day.)

Answer 1

To determine the days' sales in accounts receivable, first calculate the average accounts receivable, then the accounts receivable turnover ratio, and finally divide the days in a year by this ratio. The result for the given figures is 75 days.

Step-by-step explanation:

The days' sales in accounts receivable is calculated using the average accounts receivable and net credit sales to give insight into how effectively a company is managing its accounts receivable.

Steps to Calculate Days' Sales in Accounts Receivable:

1. Calculate the average accounts receivable by adding the beginning and ending accounts receivable, then dividing by two. For the values given: (290,000+201,000)/2 = 245,500.
2. Divide the net credit sales by the average accounts receivable to find the accounts receivable turnover ratio. Using the values given: 1,200,000 / 245,500 = 4.89 times.
3. Finally, to find the days' sales in accounts receivable, divide the number of days in a year (365) by the accounts receivable turnover ratio. 365 / 4.89 = 74.64 days.

Rounding to the nearest whole day, the company's days' sales in accounts receivable would be 75 days.

Answer 2

Days of receivable will be 75 days

Step-by-step explanation:

We have given net credit sales = $1200000

Net account receivable at the beginning = $290000

And receivable at the ending = $201000

Average receivable
`=(290000+201000)/(2)=$245500`

Now receivables turnover ratio
`=(credit\ sales)/(average\ receivable)=(1200000)/(245500)=4.888`

Days of receivables =
`(365)/(4.888)=74.67=75days`