The Arizona Bay Corporation sells on credit terms of net 30. Its accounts are, on average, four days past due. If annual credit sales are $9.75 million, what is the company’s balance sheet amount in accounts receivable?
Annual credit sales of 7.75 million - divide this by 365 and that gives you the daily credit sales = 26,712 multiplied by the 34 collection period and your total is $908,219.18
4/360 * 9.75Million= ...
To calculate the balance sheet amount in accounts receivable, we need to determine the average daily credit sales and multiply it by the average number of days accounts are past due.
Step 1: Calculate the average daily credit sales
Average daily credit sales = Annual credit sales / 365 days
Annual credit sales = $9.75 million
Average daily credit sales = $9.75 million / 365 days
Step 2: Calculate the average number of days accounts are past due
Average number of days accounts are past due = 4 days
Step 3: Calculate the balance sheet amount in accounts receivable
Balance sheet amount in accounts receivable = Average daily credit sales * Average number of days accounts are past due
Now, let's calculate it:
Average daily credit sales = $9.75 million / 365 days = $26,712.33
Balance sheet amount in accounts receivable = $26,712.33 * 4 days
Therefore, the company's balance sheet amount in accounts receivable is approximately $106,849.32.
To find the company's balance sheet amount in accounts receivable, we need to calculate the average accounts receivable balance.
The average accounts receivable balance can be determined using the formula:
Average Accounts Receivable = (Net Credit Sales / 365) * Average Collection Period
Given information:
- Annual net credit sales: $9.75 million
- Credit terms: net 30 (which means the average collection period is 30 days)
- Average past due period: 4 days
Calculating the Average Collection Period:
Average Collection Period = Credit Terms - Average Past Due Period
Average Collection Period = 30 days - 4 days
Average Collection Period = 26 days
Now, substitute the values into the formula:
Average Accounts Receivable = ($9.75 million / 365) * 26
Average Accounts Receivable = $267,123.29
Therefore, the company's balance sheet amount in accounts receivable is approximately $267,123.29.