Question

Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year.

A company reports the following:
Net Sales $1,200,000
Average accounts receivable (Net) 100,000
a. Accounts receivable turnover _____
b. Number of days' sales in receivables _____ days _____
Determine (a) the inventory turnover and (b) the number of days' sales in inventory. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume 365 days a year. A company reports the following:
Cost of goods sold $630,000
Average inventory 90,000
a. Inventory turnover _____
b. Number of days' sales in inventory _____ days

Answer 1

Determination of the following:

1a. Accounts receivable turnover _____ 30.4 x

b. Number of days' sales in receivables _____ 12 days

2a. Inventory turnover _____ 52.1x

b. Number of days' sales in inventory _____ 7 days

Step-by-step explanation:

a) Data and Calculations:

Company A:

Net sales = $1,200,000

Average accounts receivable (net) = $100,000

Accounts receivable turnover = Net sales/Average accounts receivable

= $100,000/$1,200,000 * 365

= 30.4x

Number of days' sales in receivables = Number of days in the period/Accounts receivable turnover

= 365/30.4 = 12 days

Inventory Turnover = Average inventory /Cost of goods sold * 365

= $90,000/$630,000 * 365

= 52.1x

Number of days' sales in inventory = Number of days in the period/Inventory Turnover

= 365/52.1

= 7 days