Question

Based on the following data for the current year, what is the number of days' sales in receivables? Assume 365-Day year.

Sales on account during year	$570,068
Cost of goods sold during year	219,238
Accounts receivable, beginning of year	46,044
Accounts receivable, end of year	51,623
Inventory, beginning of year	91,672
Inventory, end of year	116,124

Round your answer up to the nearest whole day.

a.31

b.74

c.67

d.140

Answer 1

Solution :

The formula for calculating the day’s sales in receivables is

= ( Average Accounts receivable / Net credit sales during the year ) * 365

As per the information given in the question we have

Net credit sales during the year = Sales on account during year = $ 570,068 ;

Accounts receivable, beginning of year = $ 46,044 ; Accounts receivable, end of year = $ 51,623

Thus average accounts receivables during             the year = ( Accounts receivable at the beginning of year + Accounts receivable at the end of year ) / 2

= ( $ 46,044 + $ 51,623 ) / 2 = $ 97,667 / 2

= $ 48,833.50

Thus average accounts receivables during the year = $ 48,833.50

Applying the available information in the formula we have day’s sales in receivables as

= ( $ 48,833.50 / $ 570,068 ) * 365

= 0.085663 * 365

= 31.266844

= 31 ( when rounded off to the nearest whole day)

Thus the number of days' sales in receivables = 31 days

The solution is option a. 31