Magdalene Pottery and Gifts has annual sales revenue of $1,596,875, of which 80% are on credit, and accounts receivable of $143,500. What is the company's average collection period for receivables in days?

Question

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The average collection period is calculated by dividing accounts receivable by average daily credit sales. First, calculate the annual credit sales: $1,596,875 * 80% = $1,277,500. Then, find the average daily credit sales: $1,277,500 / 365 = $3,500. The average collection period is $143,500 / $3,500 = 41 days.

Magdalene Pottery and Gifts Has Annual Sales Revenue of $1,596,875