A firm expects next year's sales to be $108,000,000. Estimate the year-end balance in accounts receivable if it expects the average collection period to be 42 days.

Question

Quizplus · Accepted Answer

To estimate the year-end balance in accounts receivable, we need to calculate the average daily sales and multiply it by the average collection period.

Average daily sales = Annual sales / 365 days = $108,000,000 / 365 = $295,890.41

Accounts receivable = Average daily sales x Average collection period 
= $295,890.41 x 42 
= $12,420,000

Therefore, the best choice is C) $12,600,000 as the closest option to our estimation.

A Firm Expects Next Year's Sales to Be $108,000,000