Question

Trout Lumber Yard has a current accounts receivable balance of $527,164. Credit sales for the year just ended were $6,787,626. a. What is the receivables turnover? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the days’ sales in receivables? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. How long did it take on average for credit customers to pay off their accounts during the past year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

a. 12.88 times

b. 28.35 days

c. 28.35 days

Step-by-step explanation:

a. Receivables turnover

Receivables turnover = Credit sales ÷ Receivables

= $6,787,626 ÷ $527,164

= 12.88 times

b. Days’ sales in receivables

Days' sales in receivables = 365 days ÷ Receivables turnover

= 365 ÷ 12.88

= 28.35 days

c. On average it would take 28.35 days for credit customers to pay off their balances during the last year.