At December 31, 20X2, Curry Co. had the following balances in selected asset accounts: Curry also had current liabilities of $1,000 at December 31, 20X2, and net credit sales of $7,200 for the year then ended. What was the average number of days to collect Curry's accounts receivable during 20X2?

Question

At December 31, 20X2, Curry Co. had the following balances in selected asset accounts:  Curry also had current liabilities of $1,000 at December 31, 20X2, and net credit sales of $7,200 for the year then ended. What was the average number of days to collect Curry's accounts receivable during 20X2?

Quizplus · Accepted Answer

Choice "C" is correct. The average number of days to collect accounts receivable is calculated by dividing 365 days by the accounts receivable turnover. Accounts receivable turnover is net credit sales divided by the average accounts receivable: Choice "A" is incorrect. The denominator should be net credit sales ($7,200) divided by average receivables $1,000), or 7.2, not 12. 11ec2ce7_1b68_4b38_89bf_019c5af3b5b6_C1085_00 Choice "B" is incorrect. The average receivable balance is $1,000, not $800. The right-hand column shows the increase over 20X1, so the 20X1 receivable balance was $1,200 $400, or $800. Since the 20X2 receivable balance was given as $1,200, the average receivable balance is $1,000. Choice "D" is incorrect. Average inventory ($1,000), not ending inventory ($1,200), should be used.