Question:
Jamison Corp had a balance in the Accounts Receivable account of $780,000 at the beginning of the year and a balance of $820,000 at the end of the year. Net credit sales during the year amounted to $5,840,000. The average number of days to sell the inventory during the year was...
Answers:
Ave AR is beginning AR + ending AR divided by 2, so
Ave AR = (780,000 + 820,000)/2 = 800,000
Receivables turnover = Annual credit sales/AR, so
Receivables turnover = 5,840,000/800,000 = 7.3
Ave collection period = 365/Receivables turnover, so
Ave collection period = 365/7.3 = 50 days
Your question doesn't sound quite right. The info you gave can only tell you the average period it takes for your debtors to pay up. To calculate the ave no. of days to turn the inventory over, you need to give me inventory information, not AR info.
Inventory turnover = COGS/Ave inventory, and
Inventory turnover (in days) = 365/Inventory turnover
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