Question

​Fisher's Furniture Store sells ​$1,230,000 worth of furniture to customers on credit each month. The Accounts Receivable balance in the accounting books averages ​$1.9 million. On​ average, how long are customers taking to pay their​ bills?

Answer 1

On​ average, it takes customers 47 days to pay their​ bills.

Step-by-step explanation:

Please find the below for detailed explanation and calculations:

Fisher's Furniture Store's annual credit sell = Monthly credit sales x 12 = $1,230,000 x 12 = $14,760,000;

Fisher's Furniture Store's account receivables turnover ratio = Annual Credit Sales / Average account Receivables = $14,760,000 / $1,900,000 = 7.77 times;

The average time it takes customers to pay ( in days) = Receivable turnover in days = 365 / The account receivables turnover ratio = 365/ 7.77 = 47 days

Thus, the answer is 47 days.