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

First, calculate the average accounts receivable by adding the beginning and ending balances and dividing by 2:

Average Accounts Receivable = (800,000 + 900,000) / 2 = 850,000

Then, calculate the accounts receivable turnover ratio by dividing net credit sales by the average accounts receivable:

Accounts Receivable Turnover Ratio = 8,040,000 / 850,000 = 9.46

Finally, calculate the average collection period in days by dividing 365 by the accounts receivable turnover ratio:

Average Collection Period = 365 / 9.46 = 38.4 days

Therefore, the best choice is B, with an average collection period of 38.4 days.

Hickory Hills Pro Shop Had a Balance in the Accounts