The Naples receivables report shows average accounts receivable of $522,000 and annual credit sales of $6,216,000. Using a 365-day year, what days sales outstanding should be reported?
Correct Answer
B) 30.7 days
Days sales outstanding divides average receivables by average daily credit sales.
Why This Is the Correct Answer
Days sales outstanding divides average receivables by average daily credit sales.
Why the Other Options Are Wrong
Option A: 26.7 days
26.7 days is below the supported result for days sales outstanding; it likely uses the wrong base, period, or account bucket.
Option C: 35.2 days
35.2 days is above the supported result for days sales outstanding; it likely adds an unsupported amount or compares the wrong financial base.
Option D: 30.2 days
30.2 days is below the supported result for days sales outstanding; it likely uses the wrong base, period, or account bucket.
Memory Technique
Controlling and sales live in different drawers; Office Manager 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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