Final answer:
The number of days' sales in receivables ratio is calculated by averaging the beginning and ending accounts receivable balances, dividing this by net credit sales, and multiplying by the days in the period. However, the calculated answer, 158.77 days, does not match any of the given options, suggesting there may be a miscalculation or incorrect options provided.
Step-by-step explanation:
The number of days' sales in receivables ratio is a measure of the average number of days it takes a company to collect payment after a sale has been made. This ratio is calculated by dividing the average accounts receivable balance by the total net credit sales and then multiplying the result by the number of days in the period. In our case, to find the average accounts receivable, we average the beginning and ending balances for the year (2017 and 2018, respectively). Thus, we get:
Average Accounts Receivable = (Beginning Balance + Ending Balance) / 2 = ($378,550 + $425,650) / 2 = $402,100
We then divide this by the net credit sales for the year, and multiply by the number of days in a year (usually 365):
Days’ Sales in Receivables = (Average Accounts Receivable / Net Credit Sales) × Number of Days in Period = ($402,100 / $924,123) × 365
Calculating this we get:
Days’ Sales in Receivables = 0.4350 × 365 = 158.77 days
However, since none of the given options match the calculated figure, it appears there may be an error in the calculation or the options provided. The correct calculation should give one of the options as an answer.