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 $2,000,000. The average collection period of the receivables in terms of days was

Question

Quizplus · Accepted Answer

To determine the average collection period, we need to use the following formula:

Average Collection Period = (Accounts Receivable / Net Credit Sales) x 365

Accounts Receivable at the beginning of the year = $390,000
Accounts Receivable at the end of the year = $410,000

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
= ($390,000 + $410,000) / 2
= $400,000

Net Credit Sales = $2,000,000

Plugging in the values:

Average Collection Period = ($400,000 / $2,000,000) x 365
= 73 days

Therefore, the average collection period of the receivables is 73 days. The best choice is D.

Walker Clothing Store Had a Balance in the Accounts Receivable