If hot tubs had sales of $100,000 per year (all credit) and its days sales outstanding was equal to 25 days, what was its average amount of accounts receivable outstanding?
To find the average amount of accounts receivable outstanding, we need to first calculate the average daily sales.
Step 1: Calculate the average daily sales.
Average daily sales = Total sales / Number of days
Given that the hot tubs had sales of $100,000 per year and the number of days sales outstanding is 25, we can calculate the average daily sales:
Average daily sales = $100,000 / 365 days
Step 2: Calculate the average accounts receivable outstanding.
Average accounts receivable outstanding = Average daily sales * Days sales outstanding
Average accounts receivable outstanding = Average daily sales * 25 days
Let's calculate the values:
Average daily sales = $100,000 / 365 days
Round this value to the desired accuracy.
Average accounts receivable outstanding = Average daily sales * 25 days
By following these steps, you can calculate the average amount of accounts receivable outstanding.