A company reports the following:

Question

Line Item Description Amount
Sales $233,600
Average accounts receivable (net) 23,360
Determine (a) the accounts receivable turnover and (b) the days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year.

Line Item Description Answer
a. Accounts receivable turnover fill in the blank 1
b. Days' sales in receivables fill in the blank 2
days

Answer 1

To determine the accounts receivable turnover and the days' sales in receivables, we can use the following formulas:

a. Accounts Receivable Turnover

The formula for the accounts receivable turnover is:

\[ \text{Accounts Receivable Turnover} = \frac{\text{Net Sales}}{\text{Average Accounts Receivable}} \]

Plugging in the values:

• Net Sales = $233,600
• Average Accounts Receivable = $23,360

\[ \text{Accounts Receivable Turnover} = \frac{233,600}{23,360} \approx 10.0 \]

b. Days' Sales in Receivables

The formula for days' sales in receivables is:

\[ \text{Days' Sales in Receivables} = \frac{365}{\text{Accounts Receivable Turnover}} \]

Using the turnover we just calculated:

\[ \text{Days' Sales in Receivables} = \frac{365}{10.0} = 36.5 \text{ days} \]

Final Answers:

• a. Accounts Receivable Turnover: 10.0
• b. Days' Sales in Receivables: 36.5 days