I\'ve just asked this question but the format didn\'t copy good, so I\'ll put it

Question

I've just asked this question but the format didn't copy good, so I'll put it in a different way to make it more clear. John Byers owns and operates Byers Building supplies. The following information was taken from his financial statements: Balance Sheet: 12/31/2012---Accounts Receivable=$700; Inventory=$300. Balance Sheet 12/31/2011---Accounts Receivable=$500; Inventory=$100. On the Income Statement: Net Credit Sales=$7,200; Cost of Goods Sold=$5,000. All sales are made on account. Based on this information, approx. how many days pass from the time Byers purchases inventory until he receives cash from customers? Correct answer is 45 days but how do I get that figure? I keep getting 31 days. Thanks for your help!

Explanation / Answer

Days Sales outstanding DSO = Average Accounts Receivable/Net Credit sales in month so DSO = 365*((700+500)/2)/7200 = 30 days Inventory Turnover (ITR) = Cost of Goods Sold/Average Inventory ie ITR = (5000)/((300+100)/2) = 25 Days Receivables Turnover (RTR) = Net Credit Sales/Average Accounts Receivable ie RTR = 7200/((700+500)/2) = 1200/365 = 3.3

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.