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19 March, 06:28

Basic Design had net credit sales of $400,000 during the year and an average accounts receivable balance of $40,000. On average, how many days did it take Basic Design to collect Accounts Receivable (round to two decimal places)

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  1. 19 March, 09:34
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    36.50 days

    Explanation:

    The computation of the number of days to collect is shown below:

    As we know that

    Account receivable turnover ratio = Net credit sales : Average accounts receivable

    where,

    Net credit sales is $400,000

    And, the Average accounts receivable is $40,000

    So, the accounts receivable turnover ratio would be

    = $400,000 : $40,000

    = 10 times

    Now the number of days collected is

    = Total number of days in a year : Accounts receivable turnover ratio

    = 365 days : 10

    = 36.50 days
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