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27 February, 17:31

The Bear Rug has sales of $811,000. The cost of goods sold is equal to 63 percent of sales. The beginning accounts receivable balance is $41,000 and the ending accounts receivable balance is $38,000. How long on average does it take the firm to collect its receivables?

(A) 17.26 days

(B) 17.78 days

(C) 18.58 days

(D) 20.44 days

(E) 29.77 days

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  1. 27 February, 19:28
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    B. 17.78 days

    Explanation:

    Days Sales Outstanding or Age of Receivables measures the average number of days it take for a company to collect its receivables.

    This is computed by dividing the Average Accounts Receivables over Daily Sales. Bear Rug's Average Accounts Receivable is $39,500 ($41,000 + $38,000/2) while its Daily Sales is 2,222 ($811,000/365).

    Thus, the average days for the firm to collect its receivables are 17.78 days ($39,500/2,222).
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