Chapter 4, Problem 54E

Exercise 4-54 Operating Cycle and Current Receivables

a. Dither and Sly are attorneys-at-law who specialize in federal income tax law. The): complete their typical case in 6 months or less and collect from the typical client within 1 additional month.

b. Johnston’s Market specializes in fresh meat and fish. All merchandise must be sold within one week of purchase. Almost all sales are for cash and any receivables are generally paid by the end of the following month.

c. Mortondo’s is a women’s clothing store specializing in high-style merchandise. Merchandise spends an average of 7 months on the rack following purchase. Most sales are on credit and the typical customer pays within 1 month of sale.

d. Trees Inc. grows Christmas trees and sells them to various Christmas tree lots. Most sales are for cash. It takes 6 years to grow a tree.

Required:

For each of the businesses described above, indicate the length of the operating cycle.