Chapter 24, Problem 1CP

This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter.

Days cash is outstanding for merchandise: 54.04 days

Combining the information provided by various ratios can enhance your understanding of the financial condition of a business. Review the information provided for Na Pali Coast Company in the Mastery Problem. Using this information, respond to the following questions:

REQUIRED

1. 1. Compute the average number of days required to sell inventory and collect cash from customers buying on account.
2. 2. Note that Na Pali Coast Company also buys inventory on account. On average, how many days pass before Na Pali pays its creditors?
3. 3. Using the information from your answers to parts (1) and (2), compute the number of days from the time Na Pali Coast pays for inventory until it receives cash from customers on account.