Question

Baxley Brothers has a DSO of 17 days, and its annual sales are $6,570,000. What is its accounts receivable balance? Assume that it uses a 365-day year. Round your answer to the nearest cent.

Answer 1

Accounts receivable balance=$306,000.

Step-by-step explanation:

Given Data:

DSO=17 days

Annual sales=$6,570,000

Number of days in year=365 days

Required:

Accounts receivable balance=?

Solution:

`DSO=(Account\s receivable)/(Average\ Sales\ Per\ Day)`

Average sales per day:

`Average\ sales\ Per\ day=(Annual\ Sales)/(Days\ In\ year)\\ Average\ sales\ Per\ day=(\$6,570,000)/(365)\\ Average\ sales\ Per\ day=\$18,000`

Calculating account receivable:

`Account\ receivable=DSO*Average\ sales\ Per\ day\\Account\ receivable=17*\$18,000\\Account\ receivable=\$306,000`

Accounts receivable balance=$306,000.