Question

Use the data to complete the following two questions:

In 2014 the sales were $1,426,870 with returns of $22,600. Their Accounts Receivable at the beginning of the year were $99,500 and $76,800 at the end of the year for 2014.

What is the Accounts Receivable Turnover in 2014?

What is the Number of Days' in Sales Receivables in 2014?

Answer 1

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($99,500 + $76,800) / 2
Average Accounts Receivable = $88,150

Net Sales = Sales - Sales Returns
Net Sales = $1,426,870 - $22,600
Net Sales = $1,404,270

Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Accounts Receivable Turnover = $1,404,270 / $88,150
Accounts Receivable Turnover = 15.93

Number of Days’ in Sales Receivable = 365 / Accounts Receivable Turnover
Number of Days’ in Sales Receivable = 365 / 15.93
Number of Days’ in Sales Receivable = 22.91 days