Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The average collection period of the receivables in terms of days was

Question

Quizplus · Accepted Answer

Using the formula for average collection period:
Average Collection Period (in days) = (Accounts Receivable / Net Credit Sales) x Number of Days in Period

We are given:
Beginning Accounts Receivable = $800,000
Ending Accounts Receivable = $900,000
Net Credit Sales = $8,040,000

First, we need to find the average Accounts Receivable for the year:
Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
Average Accounts Receivable = ($800,000 + $900,000) / 2
Average Accounts Receivable = $850,000

Now we can calculate the Average Collection Period:
Average Collection Period = ($850,000 / $8,040,000) x 365 days
Average Collection Period = 38.4 days

Therefore, the best choice is B (38.4 days).

Hickory Hills Pro Shop Had a Balance in the Accounts