Answer (A) is correct . The average number of days’ sales in receivables equals 365 days divided by the accounts receivable turnover. The accounts receivable turnover is determined by dividing the average accounts receivable balance into sales. The average balance was $207 [($204 + $210) ÷ 2]. Dividing $207 into sales of $4,175 produces an average turnover rate of 20.1691 times. Thus, the average days’ sales in receivables was 18.097 days (365 ÷ 20.1691).
Answer (B) is incorrect because The average turnover rate is 20.17.
Answer (C) is incorrect because The number 17.83 is calculated using the Year 1 ending balance, not the average balance, in accounts receivable to calculate the average turnover rate.
Answer (D) is incorrect because Using the Year 2 ending balance, not the average balance, in accounts receivable to calculate the average turnover rate results in 18.36.
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The number of days of receivables (using 365 days) for Ostrander Corporation in Year 2 is
