Question

The following information was available for the year ended December 31, 2019:

Net sales $ 300,000
Cost of goods sold 210,000
Average accounts receivable for the year 15,000
Accounts receivable at year-end 18,000
Average inventory for the year 60,000
Inventory at year-end 70,000

The number of days’ sales in accounts receivable for 2019, using year-end accounts receivable were ____.

Answer 1

The number of days’ sales in accounts receivable for 2019, using year-end accounts receivable were ____21.9 days almost 22 days

Step-by-step explanation:

The days ' sales in receivable is computed by dividing the current balances of receivables by net credit sales over the year just completed and then multiplying by 365 (number of days in a year).

Days' Sales in receivable= (Accounts Receivable/ Net sale )*365

Days' Sales in receivable=(Accounts receivable at year-end/ Net sale )*365

Days' Sales in receivable= (18,000/$ 300,000)*365

Days' Sales in receivable=(0.06)*365= 21.9 days

It means it will take almost 22 days to collect cash from ending accounts receivable.This number reflects one or more of the following factors; a company's ability to collect receivables , customer financial health , customer payment strategies and discount terms.