At year-end, Simple has cash of $ 22 comma 000, current accounts receivable of $
ID: 341496 • Letter: A
Question
At year-end, Simple has cash of $ 22 comma 000, current accounts receivable of $ 80 comma 000, merchandise inventory of $ 24 comma 000, and prepaid expenses totaling $ 4 comma 600. Liabilities of $ 64 comma 000 must be paid next year. Assume accounts receivable had a beginning balance of $ 40 comma 000 and net credit sales for the current year totaled $ 480 comma 000. How many days did it take Simple to collect its average level of receivables? (Assume 365 days/year. Round any interim calculations to two decimal places. Round the number of days to the nearest whole number.)
Explanation / Answer
Average account receivable = (80000+40000/2) = 60000
Receivable turnover = Net credit sales/average account receivable
= 480000/60000
Receivable turnover = 8 times
No of days to collect its average receivable = 365/8 = 46 days
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