Credit Sales = $175,000 COGS = $125,000
How many days are in the receivables period?

Question

Quizplus · Accepted Answer

Receivables period = (Accounts receivable / Credit Sales) x 365

We don't have the value of accounts receivable, but we can use the average accounts receivable:

Average accounts receivable = (Beginning accounts receivable + Ending accounts receivable) / 2

Without this information, we can't calculate the receivables period exactly. However, we can estimate it by assuming that the average accounts receivable equals the ending accounts receivable:

Accounts receivable = Ending accounts receivable
               = Credit sales - Cash collected
               = $175,000 - ($175,000 - $125,000)
               = $125,000

Receivables period = ($125,000 / $175,000) x 365
                   = 260 days / 7
                   = 37.14 weeks

This is an estimate, since we assumed that the average accounts receivable equals the ending accounts receivable. However, it's safe to assume that the receivables period is around 40-50 days, since that's typical for most businesses.

Therefore, the best choice is B) 45 days, as it falls within this range.