Carla's Fashions has an average collection period of 30 days.You could infer that Carla's Fashions:
A)bills her customers monthly.
B)bills her customers quarterly.
C)has an accounts receivable turnover of approximately 12.
D)Both A and C can be inferred.

Question

Quizplus · Accepted Answer

An average collection period of 30 days means that it takes Carla's Fashions about a month to collect payment from her customers. This implies that she bills her customers on a monthly basis (choice A). Additionally, the accounts receivable turnover is calculated by dividing the total credit sales by the average accounts receivable balance for a period. Since the average collection period is 30 days, this means that the accounts receivable turnover would be approximately 12 (12 months in a year divided by an average collection period of one month). Therefore, both choices A and C can be inferred.

Carla's Fashions Has an Average Collection Period of 30 Days