Dana Company's December 31, 2012, financial statements showed the following:

-Refer to Exhibit 6-1. Given the information above, Dana Company's average collection period (rounded) for 2012 was

Question

Dana Company's December 31, 2012, financial statements showed the following:
 
-Refer to Exhibit 6-1. Given the information above, Dana Company's average collection period (rounded) for 2012 was

Quizplus · Accepted Answer

To calculate the average collection period, we need to divide accounts receivable by average daily sales. 
Average daily sales = (Net Sales Revenue for the year / 365 days) 
= $125,000 / 365 
= $342.47 
Accounts receivable turnover = Net Sales Revenue for the year / Accounts Receivable 
= $125,000 / $20,000 
= 6.25 
Average collection period = 365 days / Accounts receivable turnover 
= 365 / 6.25 
= 58.4 days (rounded to 61 days) 
Therefore, the answer is D, 61 days.

Dana Company's December 31, 2012, Financial Statements Showed the Following