Alpha Company has the following account balances information for fiscal year 201
ID: 2579930 • Letter: A
Question
Alpha Company has the following account balances information for fiscal year 2015 & 2016 (all balances are normal):
Alpha Company
December 31
Accounts 2016 2015
Accounts Receivable $50,000 45,500
Merchandise Inventory 57,000 50,000
Office Supplies 25,000 20,000
Credit Sales 1,000,000 740,000
Interest Income 25,000 20,000
Cost of Goods Sold 460,000 385,000
1. What is the FY 2016 accounts receivable turnover ratio? Enter the answer as a number rounded to one decimal place followed by a space and the word times. (Example 1.123 would be entered 1.1 times)
2. What is the FY 2016 days outstanding for accounts receivable ratio? Enter the answer as a number rounded to one decimal place followed by a space and the word days. (Example 1.123 would be entered 1.1 days
Explanation / Answer
Solution.
1. What is the FY 2016 accounts receivable turnover ratio?
Formula = Credit Sales / Average Account receivable.
$1,000,000 / (($50,000 + $45,500) / 2 )
= 20.9 Times.
2. What is the FY 2016 days outstanding for accounts receivable ratio?
Days outstanding = Day's in a year / Accounts receivable turnover ratio
Days outstanding = 365 / 20.9 = 17.5 Day's.
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