Runners Ink, Inc. had sales last year of $700,000, and 35% of its sales are for cash, with the remainder buying on terms of net 30 days. If the receivables conversion period is actually 38 days, what is Runners Ink's accounts receivable?

Question

Quizplus · Accepted Answer

Sales made for cash = 35% of $700,000 = $245,000
Sales made on credit = $700,000 - $245,000 = $455,000

The receivables conversion period is 38 days, which is 8 days longer than the credit terms of net 30 days. This means that on average, customers are taking an extra 8 days to pay their invoices.

To find the accounts receivable, we need to calculate the amount of credit sales that are still outstanding after 38 days:

$455,000 x (38/365) = $47,370

Therefore, the accounts receivable for Runners Ink is $47,370.