Sellograph Corporation reports sales of $10 million for Year 2, with a gross profit margin of 40%. 20% of Sellograph's sales are on credit. $$\begin{array} { l r r }
& \text { Year 1 } & \text { Year 2 } \
\text { Accounts receivable } & \$ 150,000 & \$ 170,000 \
\text { Inventory } & 900,000 & 1,000,000 \
\text { Accounts payable } & 1,100,000 & 1,200,000
\end{array}$$
-Accounts receivable days outstanding at the end of Year 2 is closest to:

Question

Sellograph Corporation reports sales of $10 million for Year 2, with a gross profit margin of 40%. 20% of Sellograph's sales are on credit. $$\begin{array} { l r r } 
& \text { Year 1 } & \text { Year 2 } \
\text { Accounts receivable } & \$ 150,000 & \$ 170,000 \
\text { Inventory } & 900,000 & 1,000,000 \
\text { Accounts payable } & 1,100,000 & 1,200,000
\end{array}$$
-Accounts receivable days outstanding at the end of Year 2 is closest to:

Quizplus · Accepted Answer

Accounts receivable days outstanding is calculated as (Accounts Receivable / Credit Sales) * 365. For Year 2, credit sales are 20% of $10 million, which is $2 million. The accounts receivable at the end of Year 2 is $170,000. Therefore, the accounts receivable days outstanding is ($170,000 / $2,000,000) * 365 = 30.6 days.

Sellograph Corporation Reports Sales of $10 Million for Year 2