Question

A company reports the following:
Sales $1,500,000
Average accounts receivable (net) 100,000
Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year.
a. Accounts receivable turnover.
b. Number of days' sales in receivables. _______ days

Answer 1

Answer:

a. 15 times

b. 24.3 days

Explanation:

The computations are shown below:

a. Account receivable turnover ratio = Net credit sales ÷ Average accounts receivable

= $1,500,000 ÷ $100,000  

= 15 times

Now the Number of days' sales in receivables would be  

= Total number of days in a year ÷ Accounts receivable turnover ratio  

= 365 days ÷ 15 times

= 24.3 days