Final answer:
To find Fawnsworth's number of days' sales in receivables, one must divide the year-end accounts receivable balance by the average daily sales. The calculation results in 28.8 days, making option (c) the correct answer.
Step-by-step explanation:
The student is asking for help calculating Fawnsworth Industries' number of days' sales in receivables. To do this, we will first calculate the average daily sales and then divide the year-end accounts receivable balance by this figure. The formula for average daily sales is net sales divided by the number of days in the year, which is given as 360 days. Here is the calculation:
Average Daily Sales = Net Sales / Number of Days in the Year
Average Daily Sales = $500,000 / 360
Average Daily Sales = $1,388.89 (rounded to two decimal places)
Next, we compute the average accounts receivable by taking the sum of beginning and end-of-year receivables and dividing by two, followed by dividing this average by the average daily sales to get the days' sales in receivables.
Average Accounts Receivable = (Beginning Accounts Receivable + End Accounts Receivable) / 2
Average Accounts Receivable = ($45,000 + $35,000) / 2
Average Accounts Receivable = $40,000
Days' Sales in Receivables = Average Accounts Receivable / Average Daily Sales
Days' Sales in Receivables = $40,000 / $1,388.89
Days' Sales in Receivables = 28.8 days (rounded to one decimal place)
Therefore, the correct answer is c. 28.8 days.