A Pensacola GC's average accounts receivable is $96,000 and annual credit sales are $1,152,000. Using a 365-day year, what days sales outstanding should be shown?
Correct Answer
C) 30.4 days
Average daily sales are $3,156.16. $96,000 divided by that daily sales amount is about 30.4 days.
Why This Is the Correct Answer
Average daily sales are $3,156.16. $96,000 divided by that daily sales amount is about 30.4 days.
Why the Other Options Are Wrong
Option A: 27.8 days
27.8 days is below the supported result for receivable days outstanding; it likely uses the wrong base, period, or account bucket.
Option B: 29.2 days
29.2 days is below the supported result for receivable days outstanding; it likely uses the wrong base, period, or account bucket.
Option D: 33.1 days
33.1 days is above the supported result for receivable days outstanding; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Average and daily live in different drawers; Controller Checking tells which opens.
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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