Average receivables are $192,000 and annual credit sales are $2,336,000. Using a 365-day year, what days sales outstanding should be reported?
Correct Answer
B) 30.0 days
Average daily sales are $6,400, and $192,000 equals 30.0 days.
Why This Is the Correct Answer
Average daily sales are $6,400, and $192,000 equals 30.0 days.
Why the Other Options Are Wrong
Option A: 27.5 days
27.5 days is below the supported result for days sales outstanding; it likely uses the wrong base, period, or account bucket.
Option C: 32.5 days
32.5 days is above the supported result for days sales outstanding; it likely adds an unsupported amount or compares the wrong financial base.
Option D: 35.0 days
35.0 days is above the supported result for days sales outstanding; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
the controlling choice drawer for Construction Office: label average before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section One, Managing Receivables, Track Your Receivables Trend; Section Three, Financial Ratios; use the job ledger figures in the stem and recompute the same accounting measure.
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