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The following information is taken from Reagan Company's December 31 balance sheet:

Cash and cash equivalents $8,419
Accounts receivable 70,422
Merchandise inventories 60,362
Prepaid expenses 4,100
Accounts payable $14,950
Notes payable 86,638
Other current liabilities 9,500

If net credit sales for the current year were $612,000, what is the firm's days' sales uncollected for the year?

User ViruMax
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2 Answers

2 votes

Answer:

42 days

Step-by-step explanation:

Compute Days’ Sales Uncollected

Accounts Receivable / Net Sales x 365

70,422 / 612,000 x 365 = 42

User Diffa
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4 votes

Answer:

Firm’s sales uncollected for year is 42 days.

Step-by-step explanation:

Account receivable turnover ratio = $621,000 / $70,422

Account receivable turnover ratio = 8.69

Thus, accounts receivable turnover ratio is 8.69

Average collection period = 365 / Account receivable turnover ratio

Average collection period = 365 days / 8.69

Average collection period = 42.00

Thus, firm’s sales uncollected for year is 42 days.

User Bingles
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