Grapp Company had $130,000 in sales on account last year.The beginning accounts receivable balance was $18,000 and the ending accounts receivable balance was $16,000.The company's average collection period (age of receivables)was closest to:
A) 44.92 days.
B) 47.73 days.
C) 50.54 days.
D) 95.46 days.

Question

Quizplus · Accepted Answer

To find the average collection period, we need to divide the total number of days in the period by the accounts receivable turnover ratio.

Accounts receivable turnover ratio = Sales on Account / Average accounts receivable

Average accounts receivable = (Beginning accounts receivable balance + Ending accounts receivable balance) / 2

Average accounts receivable = ($18,000 + $16,000) / 2 = $17,000

Accounts receivable turnover ratio = $130,000 / $17,000 = 7.65

Average collection period = 365 days / 7.65 = 47.73 days (rounded to nearest hundredth)

Therefore, the best answer is B.

Grapp Company Had $130,000 in Sales on Account Last Year