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10 August, 23:15

Morning Star has credit sales of $1,032,800, costs of goods sold of $662,350, average accounts receivable of $86,300, and average accounts payable of $92,600. On average, how long does it take Morning Star's credit customers to pay for their purchases?

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  1. 11 August, 01:31
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    Answer: 33 days

    Explanation:

    Given

    Credit sales = $1,032,800

    Average accounts receivable of $86,300

    Calculation of number of days taken for customers to pay for credit purchases

    Accounts receivable turnover ratio = Net Credit sales / Average accounts receivable

    (Net credit sales means only credit sales and deduct any sales returns)

    =1032800/92600

    =11.15 times in a year

    Calculation of number of days

    =365 days/11.15 times

    =32.74 or 33 days approximately.
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