At year-end, Sample has cash of $ 15,000 , current accounts receivable of $ 30,000 , merchandise inventory of $ 40,200 , and prepaid expenses totaling $ 5,200. Liabilities of $ 60,000 must be paid next year. Assume accounts receivable had a beginning balance of $ 60,000 and net credit sales for the current year totaled $ 900,000. How many days did it take Sample 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.)

A. 37

B. 24

C. 18

D. 12

Question

Business

Thomas Wright

12 February, 00:03

At year-end, Sample has cash of $ 15,000 , current accounts receivable of $ 30,000 , merchandise inventory of $ 40,200 , and prepaid expenses totaling $ 5,200. Liabilities of $ 60,000 must be paid next year. Assume accounts receivable had a beginning balance of $ 60,000 and net credit sales for the current year totaled $ 900,000. How many days did it take Sample 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.)

A. 37

B. 24

C. 18

D. 12

+5

Answers (1)

Know the Answer?

Tamia Wiley · Answer 1

option (C) 18 days

Explanation:

Data provided in the question:

Cash = $15,000

Current accounts receivable = $30,000

Prepaid expenses = $5,200

Liabilities = $60,000

Beginning account receivable = $60,000

Net credit sales for the current year = $900,000

Now,

Average account receivable = ($30,000 + $60,000) : 2

= $45,000

Receivable turnover

= (Net credit sales) : (Average account receivable)

= $900,000 : $45,000

Receivable turnover = 20 times

Therefore,

Number of days to collect its average receivable

= 365 : (Receivable turnover)

= 365 : 20

= 18.25 ≈ 18 days

Hence,

The answer is option (C) 18 days