During the year Tulip reported net sales of $800,000. The company had accounts receivable of $75,000 at the beginning of the year and $120,000 at the end of the year Compute Tulip's average collection period (assume 365 days a year.)

Question

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Average collection period = (Accounts receivable / Annual credit sales) x 365
Annual credit sales = Net sales
Accounts receivable at the beginning of the year is not needed.
Average collection period = ($120,000 / $800,000) x 365 = 54.75 or 44.5 days (rounded to the nearest tenth)

During the Year Tulip Reported Net Sales of $800,000