Flounders Co. has an average collection period of 60 days. Total credit sales for the year were $9,855,000. What is the balance in accounts receivable at year-end?

Question

Quizplus · Accepted Answer

The average collection period of 60 days means that it takes the company 60 days on average to collect payment from its customers.

To calculate the balance in accounts receivable at year-end, we need to multiply the average daily credit sales by the number of days in the collection period:

Average daily credit sales = Total credit sales / 365 days = $9,855,000 / 365 = $27,013.70

Balance in accounts receivable = Average daily credit sales x Collection period 
= $27,013.70 x 60 
= $1,620,822

Therefore, the best choice is C: $1,620,000 (rounded to the nearest thousand).