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14 July, 01:13

At year-end, Sample has cash of $ 15,000 , current accounts receivable of $ 30,000 , merchandise inventory of $ 40,200 , and prepaid expenses totaling $ 5,200. Liabilities of $ 60,000 must be paid next year. Assume accounts receivable had a beginning balance of $ 60,000 and net credit sales for the current year totaled $ 900,000. How many days did it take Sample to collect its average level of receivables? (Assume 365 days/year. Round any interim calculations to two decimal places. Round the number of days to the nearest whole number.)

A. 37

B. 24

C. 18

D. 12

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Answers (1)
  1. 14 July, 01:32
    0
    option (C) 18 days

    Explanation:

    Data provided in the question:

    Cash = $15,000

    Current accounts receivable = $30,000

    Prepaid expenses = $5,200

    Liabilities = $60,000

    Beginning account receivable = $60,000

    Net credit sales for the current year = $900,000

    Now,

    Average account receivable = ($30,000 + $60,000) : 2

    = $45,000

    Receivable turnover

    = (Net credit sales) : (Average account receivable)

    = $900,000 : $45,000

    Receivable turnover = 20 times

    Therefore,

    Number of days to collect its average receivable

    = 365 : (Receivable turnover)

    = 365 : 20

    = 18.25 ≈ 18 days

    Hence,

    The answer is option (C) 18 days
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