A company has net sales on account of $1,200,000. Net accounts receivable at the beginning of the year are $500,000 and net accounts receivable at the end of the year are $700,000. The average number of days that the accounts receivables were on the books was
A) 8.7 days.
B) 182.5 days.
C) 304.0 days.
D) 439.8 days.

Question

Quizplus · Accepted Answer

Average accounts receivable for the year can be calculated as:

[(Beginning Accounts Receivable) + (Ending Accounts Receivable)] / 2
= [(500,000) + (700,000)] / 2
= 600,000

The average daily sales on account can be calculated as:

(Total Net Sales on Account) / (Number of Days in Year)
= (1,200,000) / (365)
≈ 3,287.67

The average number of days that the accounts receivables were on the books can be calculated as:

(Average Accounts Receivable) / (Average Daily Sales on Account)
= (600,000) / (3,287.67)
≈ 182.5 days

A Company Has Net Sales on Account of $1,200,000