Question

Item	Beginning		Ending
Inventory	$17,385		$19,108
Accounts Receivables	13,182		13,973
Accounts Payables	15,385		16,676
Net Sales		$178,312
Cost of Goods Sold		140,382

Assume all Sales are made on credit. Given the information provided, compute the Receivables Period.

Answer should include one decimal place.

Answer 1

Receivable average collection period is calculated by dividing the average balance of accounts receivable by total net credit sales for the period and multiplying the quotient by the number of days in the period.

Days sales outstanding (DSO) is a measure of the average number of days that it takes a company to collect payment after a sale has been made. DSO is often determined on a monthly, quarterly or annual basis, and can be calculated by dividing the amount of accounts receivable during a given period by the total value of credit sales during the same period, and multiplying the result by the number of days in the period measured.

AVERAGE RECEIVABLE COLLECTION PERIOD = AVERAGE BALANCE OF ACCOUNTS RECEIVABLE / TOTAL NET CREDIT SALES * 365 (TOTAL DAYS IN A YEAR)

HERE IN THE PROBLEM

To calculate the accounts receivable turnover, start by adding the beginning and ending accounts receivable and divide it by 2 to calculate the average accounts receivable for the period.

AVERAGE RECEIVABLE = RECEIVABLE AT THE BEGINNING + RECEIVABLE AT THE END / 2

RECEIVABLE AT BEGINNING = $ 13182

RECEIVABLE AT ENDING = $ 13973

AVERAGE RECEIVABLE = (13182+13973)/2

= 13577.50

NET CREDIT SALES = $ 178312

AVERAGE RECEIVABLE COLLECTION PERIOD = AVERAGE BALANCE OF ACCOUNTS RECEIVABLE / TOTAL NET CREDIT SALES * 365 (TOTAL DAYS IN A YEAR)  

= 13577.50/178312*365

= 27.79 SAY IT AS 28 DAYS takes the firm to collect payment after a sale has been made