4. Assume a business sold a total of $839,500 during the current year and its accounts receivable balance at the end of the year was $73,600. What is the number of days' sales in receivables?|
4. Assume a business sold a total of $839,500 during the current year and its accounts receivable balance at the end of the year was $73,600. What is the number of days' sales in receivables?|
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![### Accounting Practice Questions
**4. Number of Days’ Sales in Receivables Calculation**
Assume a business sold a total of $839,500 during the current year and its accounts receivable balance at the end of the year was $73,600. What is the number of days’ sales in receivables?
To calculate the number of days' sales in receivables, use the following formula:
\[ \text{Number of Days' Sales in Receivables} = \left( \frac{\text{Accounts Receivable}}{\text{Total Sales}} \right) \times 365 \]
Given:
- Total Sales = $839,500
- Accounts Receivable = $73,600
Plugging in the values:
\[ \text{Number of Days' Sales in Receivables} = \left( \frac{73,600}{839,500} \right) \times 365 \]
Calculating this will give us the number of days required to collect receivables.
**5. Journal Entry for Issuing Bonds**
Assume that $1 million five-year bonds paying an interest rate of 10% are issued when the market rate of interest is also 10%. What is the journal entry to record this event?
When bonds are issued at a rate equal to the market rate, they are issued at par value. The journal entry to record the issuing of bonds at par value would be:
**Journal Entry:**
| Date | Account Titles and Explanation | Debit ($) | Credit ($) |
| ----------- | ------------------------------------- | ----------- | ----------- |
| [Date] | Cash | 1,000,000 | |
| | Bonds Payable | | 1,000,000 |
**Explanation:**
- **Debit Cash:** Reflects the cash received from issuing the bonds.
- **Credit Bonds Payable:** Records the liability created from issuing the bonds which the business has to pay back with interest.
These questions assist in understanding the practical applications of calculating financial ratios and recording journal entries for bond issuance in accounting.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbdebabb4-53e6-4e3e-8c1d-987b854fcf5d%2F76058769-4d16-4cb1-a0e1-1a20e39e4e34%2Fdl02asi.png&w=3840&q=75)
Transcribed Image Text:### Accounting Practice Questions
**4. Number of Days’ Sales in Receivables Calculation**
Assume a business sold a total of $839,500 during the current year and its accounts receivable balance at the end of the year was $73,600. What is the number of days’ sales in receivables?
To calculate the number of days' sales in receivables, use the following formula:
\[ \text{Number of Days' Sales in Receivables} = \left( \frac{\text{Accounts Receivable}}{\text{Total Sales}} \right) \times 365 \]
Given:
- Total Sales = $839,500
- Accounts Receivable = $73,600
Plugging in the values:
\[ \text{Number of Days' Sales in Receivables} = \left( \frac{73,600}{839,500} \right) \times 365 \]
Calculating this will give us the number of days required to collect receivables.
**5. Journal Entry for Issuing Bonds**
Assume that $1 million five-year bonds paying an interest rate of 10% are issued when the market rate of interest is also 10%. What is the journal entry to record this event?
When bonds are issued at a rate equal to the market rate, they are issued at par value. The journal entry to record the issuing of bonds at par value would be:
**Journal Entry:**
| Date | Account Titles and Explanation | Debit ($) | Credit ($) |
| ----------- | ------------------------------------- | ----------- | ----------- |
| [Date] | Cash | 1,000,000 | |
| | Bonds Payable | | 1,000,000 |
**Explanation:**
- **Debit Cash:** Reflects the cash received from issuing the bonds.
- **Credit Bonds Payable:** Records the liability created from issuing the bonds which the business has to pay back with interest.
These questions assist in understanding the practical applications of calculating financial ratios and recording journal entries for bond issuance in accounting.
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Number of days' sales in receivables is the number of days it take to collect the accounts receivable.
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