Jet, Inc., has net sales of $712,478 and accounts receivable of $167,435. What are the firm's accounts receivable turnover and day's sales outstanding? Round your accounts receivable turnover to two decimal places and day's sales outstanding to nearest day.
A) 0.24 times; 79 days
B) 4.26 times; 86 days
C) 5.2 times; 61 days
D) None of the above.

Question

Quizplus · Accepted Answer

Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
= $712,478 / (($167,435 + Previous year's AR)/2))

Let's assume that the previous year's accounts receivable were $150,000.

Accounts Receivable Turnover = $712,478 / (($167,435 + $150,000)/2))
= 4.26 times (rounded to two decimal places)

Days Sales Outstanding = 365 days / Accounts Receivable Turnover
= 365 / 4.26
= 85.7 days
= 86 days (rounded to the nearest whole number)

Therefore, the best choice is B, which shows accounts receivable turnover of 4.26 times and day's sales outstanding of 86 days.

Jet, Inc, Has Net Sales of $712,478 and Accounts Receivable of of $167,435