Sellograph Corporation reports sales of $10M for Year 2, with a gross profit margin of 40%. 20% of Sellograph's sales are on credit.
$$\begin{array} { | l | r | r | }
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { Accounts receivable } & \$ 150,000 & \$ 170,000 \
\hline \text { Inventory } & 900,000 & 1,000,000 \
\hline \text { Accounts payable } & 1,100,000 & 1,200,000 \
\hline
\end{array}$$
-Accounts receivable days outstanding at the end of Year 2 is closest to:
A) 30.6 days
B) 28.8 days
C) 27.0 days
D) 6.1 days

Question

Sellograph Corporation reports sales of $10M for Year 2, with a gross profit margin of 40%. 20% of Sellograph's sales are on credit.
 $$\begin{array} { | l | r | r | } 
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { Accounts receivable } & \$ 150,000 & \$ 170,000 \
\hline \text { Inventory } & 900,000 & 1,000,000 \
\hline \text { Accounts payable } & 1,100,000 & 1,200,000 \
\hline
\end{array}$$
-Accounts receivable days outstanding at the end of Year 2 is closest to:
A) 30.6 days
B) 28.8 days
C) 27.0 days
D) 6.1 days

Quizplus · Accepted Answer

Accounts receivable days outstanding = (365 days * Average accounts receivable) / Credit salesAverage accounts receivable = ($150,000 + $170,000) / 2 = $160,000Credit sales = 20% * $10M = $2MAccounts receivable days outstanding = (365 days * $160,000) / $2M = 30.6 days

Sellograph Corporation Reports Sales of $10M for Year 2, with a Gross