Marie's Clothing Store had an accounts receivable balance of $440,000 at the beginning of the year and a year-end balance of $600,000. Net credit sales for the year totaled $3,600,000. The average collection period of the receivables was: (Round any intermediary calculations to two decimal places and your final answer to the nearest day.)
A)45 days.
B)61 days.
C)53 days.
D)8 days.

Question

Quizplus · Accepted Answer

The average collection period is calculated by dividing the average accounts receivable by the net credit sales and multiplying by 365 days. The average accounts receivable is the average of the beginning and ending balances, which is ($440,000 + $600,000) / 2 = $520,000. The average collection period is therefore $520,000 / $3,600,000 * 365 days = 53 days.

Marie's Clothing Store Had an Accounts Receivable Balance of $440,000