Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $3,000,000. The average collection period of the receivables in terms of days was

Question

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First, we need to calculate the average accounts receivable balance during the year (which is the average of the beginning and ending balances):

Average accounts receivable = (beginning balance + ending balance) / 2
Average accounts receivable = ($390,000 + $410,000) / 2
Average accounts receivable = $400,000

Next, we can calculate the accounts receivable turnover ratio:

Accounts receivable turnover ratio = net credit sales / average accounts receivable
Accounts receivable turnover ratio = $3,000,000 / $400,000
Accounts receivable turnover ratio = 7.5

Finally, we can calculate the average collection period in terms of days:

Average collection period = 365 days / accounts receivable turnover ratio
Average collection period = 365 days / 7.5
Average collection period = 48.67 days (rounded to the nearest whole day)

Therefore, the answer is D) 49 days.

Walker Clothing Store Had a Balance in the Accounts Receivable