Question

Elsee, Inc., has net sales of $15 million, and 75 percent of these are credit sales. Its cost of goods sold is 65 percent of annual net sales. The firm’s cash conversion cycle is 56.0 days. The inventory balance at the firm is $1,591,000, while its accounts payable balance is $2,068,000. What is the firm’s accounts receivable balance? (Round intermediate calculations to 1 decimal places, e.g. 15.1. and final answer to nearest whole dollar, e.g. 5,275.)

Answer 1

Net Sales	150,00,000
Credit sales =(15000000*75%) = $ 112,50,000 /-
Accounts Payable = $ 2,068,000 /-
Inventory = $ 1,591,000 /-
Cost of goods sold is = (15000000*65%) = $ 9,750,000 /-
Cash conversion cycle = 56 days
Days Payable Outstanding = (Payable/Cost of goods sold)*Days in period
Days Payable Outstanding = (2068000/9750000)*365
Days Payable Outstanding = 77.42 Days
Days sale in Inventory = (Inventory/Cost of goods sold)*No of days in period
Days sale in Inventory = (1591000/9750000)*365
Days sale in Inventory = 59.56 days
Cash conversion cycle is = DSI + DSO - DPO
56=59.56+DSO-77.42
DSO is = 73.86
Using DSO, we can find the accounts receivable as :-
DSO = (Accounts receivable/Credit sales)*No of days
73.86=(Accounts receivable/11250000)*365
Accounts Receivable is $ 2,276,506.85 /-