Question

The following balance sheet information was provided by Western Company: Assuming 2014 net credit sales totaled $270,000, what was the company's average days to collect receivables? (Use 365 days in a year. Do not round your intermediate calculations.)

Answer 1

20 days

Step-by-step explanation:

Step 1. To calculate average days to collect receivables we first determine the Accounts receivable turnover ratio which is calculated by dividing your net credit sales by your average accounts receivable.

Credit Sales = 270,000

Accounts receivable = 15,000

Accounts Receivables Turnover = (270,000 / 15,000) = 18 times

Step 2: Divide the days of the year by the Accounts Receivables Turnover

Therefore the company's average days to collect receivables = 365 / 18 = 20 days