Question

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Ordonez Lumber Yard has a current accounts receivable balance off \( \$ 700,000 \). Credit sales for the year just ended were \( \$ 10 \) million. What is the receivables turnover? The days' sales in

Answer 1

The receivables turnover is approximately 28.57. The days' sales in receivables is approximately 12.77.

Step-by-step explanation:

To calculate the receivables turnover, we need to divide the credit sales for the year by the average accounts receivable balance. The average accounts receivable can be estimated by taking the beginning and ending accounts receivable balance and dividing it by 2. In this case, the credit sales were $10 million and the current accounts receivable balance is $700,000. So, the average accounts receivable balance would be $350,000. Dividing the credit sales by the average accounts receivable gives us a receivables turnover of approximately 28.57.

To calculate the days' sales in receivables, we need to divide 365 days by the receivables turnover. In this case, dividing 365 by 28.57 gives us approximately 12.77 days. So, the days' sales in receivables is approximately 12.77.