Question

EXHIBIT A Sherman, Inc. Balance Sheet As of December 31, 20X1 and 20X2 Assets 20X1 20X2 $ 49,000 10,000 Current assets Cash Marketable securities Accounts receivable Inventory Total current assets $ 23,000 8,000 66.000 180.000 $277.000 92,000 170,000 $321.000 Noncurrent (fixed) assets Land Buildings Equipment Less: Accumulated depreciation Total fixed assets (net) Total assets $ 90,000 105,000 115,000 42,000) $268,000 $545,000 $ 50,000 125.000 170.000 (69.000) $276.000 $597.000 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 47,000 Notes payable-banks 50,000 Current portion of long-term debt-mortgage 30,000 Total current liabilities $127,000 $ 34,000 30,000 30,000 $94.000 Long-term liabilities Long-term debt-mortgage Total liabilities $120,000 $247,000 $ 90,000 $184.000 Stockholders' equity Common stock at par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $164,000 134.000 $298.000 $214,000 199,000 $413,000 $545,000 $597.000

What is the average number of days that Shermin, Inc., took to collect its receivables in 20X2?

a) 10.07

b) 8.23

c) 6.48

d) 54.19

Answer 1

Solution:

Average nos of days to collect receivables = Average accounts receivables * Nos of days in a year / Net sales

Average accounts receivables = ($66,000 + $92,000) / 2 = $79,000

Average nos of days to collect receivables = $79,000*365 / $3,503,000 = 8.23 days

Hence option b is correct.