MC Qu. 91 The following information is taken from Reagan... The following inform

Question

MC Qu. 91 The following information is taken from Reagan... The following information is taken from Reagan Company's December 31 balance sheet: Cash and cash equivalents $8,419 Accounts receivable 70,422 Merchandise inventories 60,362 Prepaid expenses 4,100 Accounts payable $14,950 Notes payable 86,638 Other current liabilities 9,500 If net credit sales for the current year were $612,000, the firm's days' sales uncollected for the year is:

MC Qu. 91 The following information is taken from Reagan...

The following information is taken from Reagan Company's December 31 balance sheet:

If net credit sales for the current year were $612,000, the firm's days' sales uncollected for the year is:

Cash and cash equivalents $8,419 Accounts receivable 70,422 Merchandise inventories 60,362 Prepaid expenses 4,100 Accounts payable $14,950 Notes payable 86,638 Other current liabilities 9,500

Explanation / Answer

Days Sales Uncollected for the year implies the Debtors Turnover Ratio calculated in number of days

The Debtors Turnover Ratio is calculated using the formula Sales/Average Accounts Receivables

In the absence of the information about opening receivables, the closing figure is assumed to be the average figure

Hence, Debtors Turnover Ratio for Reagan = $ 612,000 / $ 70,422 = 8.69 times

Considering the number of days in a year as 365, the firm's days sales uncollected for the year works out to         365 / 8.69 = 42 days.

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

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