Question

the days sales in inventory = 365 days ÷ inventory turnover = 125 days\
compute the gross profit percentage (round your answer to the nearest tenth of a percent, x.x %.)\
the gross profit percentage = gross profit ÷ net sales revenue = 59.4 %\
requirement 2. compute days sales in receivables during 2025. round intermediate calculations to three decimal places. assume all sales were on account (round intermediate calculations to three decimal places, x.xxx, and round your final answer to the nearest whole day.)\
days sales in average receivables = \
\
balance sheets\
\
income statement\
low corporation\
income statement\
years ended may 31, 2025 and 2024\
2025 2024\
net sales revenue $ 51,200,000 $ 41,400,000\
cost of goods sold 20,800,000 20,300,000\
interest expense 700,000 140,000\
all other expenses 6,700,000 7,000,000\
net income $ 23,000,000 $ 14,000,000\
\
options for days sales in average receivables formula:\
365 days ÷ accounts receivable turnover ratio\
365 days ÷ inventory turnover\
365 days ÷ total current assets\
cost of goods sold ÷ average merchandise inventory\
cost of goods sold ÷ net sales revenue\
gross profit ÷ net sales revenue\
gross profit ÷ total assets\
net credit sales ÷ average net accounts receivable\
net credit sales ÷ net income

Explanation:

To compute the days’ sales in receivables, we first need to recall the formula for the accounts receivable turnover ratio, which is \( \text{Accounts Receivable Turnover Ratio} = \frac{\text{Net Credit Sales}}{\text{Average Net Accounts Receivable}} \). Then, the days’ sales in receivables is calculated as \( \text{Days’ Sales in Receivables} = \frac{365}{\text{Accounts Receivable Turnover Ratio}} \), which is equivalent to \( 365 \text{ days} \div \text{Accounts Receivable Turnover Ratio} \).

First, we need to determine the net credit sales and the average net accounts receivable. From the income statement, the net sales revenue for 2025 is $51,200,000 (we assume all sales are on account, so net credit sales = net sales revenue). From the balance sheet, the accounts receivable for 2025 is $7,500,000 and for 2024 is $12,600,000. The average net accounts receivable is \( \frac{7,500,000 + 12,600,000}{2} = \frac{20,100,000}{2} = 10,050,000 \).

Now, calculate the accounts receivable turnover ratio: \( \text{Accounts Receivable Turnover Ratio} = \frac{51,200,000}{10,050,000} \approx 5.0945 \) (rounded to four decimal places).

Then, calculate the days’ sales in receivables: \( \text{Days’ Sales in Receivables} = \frac{365}{5.0945} \approx 71.65 \) (rounded to the nearest whole day, it is 72 days). But first, we need to identify the correct formula from the dropdown. The correct formula for days’ sales in average receivables is \( 365 \text{ days} \div \text{Accounts receivable turnover ratio} \).

So the correct option from the dropdown is "365 days ÷ Accounts receivable turnover ratio".

To compute the value:

1. Calculate average net accounts receivable:

• 2025 accounts receivable: $7,500,000
• 2024 accounts receivable: $12,600,000
• Average = \( \frac{7,500,000 + 12,600,000}{2} = 10,050,000 \)

1. Calculate accounts receivable turnover ratio:

• Net credit sales (net sales revenue) for 2025: $51,200,000
• Turnover ratio = \( \frac{51,200,000}{10,050,000} \approx 5.0945 \)

1. Calculate days’ sales in receivables:

• Days = \( \frac{365}{5.0945} \approx 72 \) (rounded to the nearest whole day)

So the dropdown option is "365 days ÷ Accounts receivable turnover ratio" and the number of days is approximately 72.

Answer:

To compute the days’ sales in receivables, we first need to recall the formula for the accounts receivable turnover ratio, which is \( \text{Accounts Receivable Turnover Ratio} = \frac{\text{Net Credit Sales}}{\text{Average Net Accounts Receivable}} \). Then, the days’ sales in receivables is calculated as \( \text{Days’ Sales in Receivables} = \frac{365}{\text{Accounts Receivable Turnover Ratio}} \), which is equivalent to \( 365 \text{ days} \div \text{Accounts Receivable Turnover Ratio} \).

First, we need to determine the net credit sales and the average net accounts receivable. From the income statement, the net sales revenue for 2025 is $51,200,000 (we assume all sales are on account, so net credit sales = net sales revenue). From the balance sheet, the accounts receivable for 2025 is $7,500,000 and for 2024 is $12,600,000. The average net accounts receivable is \( \frac{7,500,000 + 12,600,000}{2} = \frac{20,100,000}{2} = 10,050,000 \).

Now, calculate the accounts receivable turnover ratio: \( \text{Accounts Receivable Turnover Ratio} = \frac{51,200,000}{10,050,000} \approx 5.0945 \) (rounded to four decimal places).

Then, calculate the days’ sales in receivables: \( \text{Days’ Sales in Receivables} = \frac{365}{5.0945} \approx 71.65 \) (rounded to the nearest whole day, it is 72 days). But first, we need to identify the correct formula from the dropdown. The correct formula for days’ sales in average receivables is \( 365 \text{ days} \div \text{Accounts receivable turnover ratio} \).

So the correct option from the dropdown is "365 days ÷ Accounts receivable turnover ratio".

To compute the value:

1. Calculate average net accounts receivable:

• 2025 accounts receivable: $7,500,000
• 2024 accounts receivable: $12,600,000
• Average = \( \frac{7,500,000 + 12,600,000}{2} = 10,050,000 \)

1. Calculate accounts receivable turnover ratio:

• Net credit sales (net sales revenue) for 2025: $51,200,000
• Turnover ratio = \( \frac{51,200,000}{10,050,000} \approx 5.0945 \)

1. Calculate days’ sales in receivables:

• Days = \( \frac{365}{5.0945} \approx 72 \) (rounded to the nearest whole day)

So the dropdown option is "365 days ÷ Accounts receivable turnover ratio" and the number of days is approximately 72.