Natcher Corporations accounts receivable at the end of Year

Natcher Corporation\'s accounts receivable at the end of Year 2 was $139,000 and its accounts receivable at the end of Year 1 was $146,000. The company\'s inventory at the end of Year 2 was $143,000 and its inventory at the end of Year 1 was $134,000. Sales, all on account, amounted to $1,397,000 in Year 2. Cost of goods sold amounted to $814,000 in Year 2. The company\'s operating cycle for Year 2 is closest to: (Round your intermediate calculations to 1 decimal place.) 03:04:12 Multiple Choice 991 days 71.7 days 67.8 days 47.0 days

Solution

Operating cycle = Inventory period+Account receivable period

Inventory turnover = COGS/Average inventory = 814000/138500 = 5.88

Inventory period = 365/inventory turnover = 365/5.88 = 62.07 days

Receivable turnover = sales/average receivable = 1397000/142500 = 9.80

Receivable period = 365/9.80 = 37.24 days

Operating cycle = 37.24+62.07 = 99.1 days

so answer is a) 99.1 days