Kay's House of Sound sells 520 musical instruments a year at an average price per instrument of $580.All sales are credit sales with terms of 2/10,net 25.Hogan's has found that 78 percent of its customers take advantage of the discounted price.What is the amount of the firm's average accounts receivable?
A)$9,560
B)$10,990
C)$11,280
D)$12,440
E)$12,620

Question

Quizplus · Accepted Answer

Total sales = 520 × $580 = $301,600; Average collection period = (0.78 × 10) + (0.22 × 25) = 13.3 days; Accounts receivable turnover rate = 365/13.3 = 27.443609; Average accounts receivable = $301,600/27.443609 = $10,990

Kay's House of Sound Sells 520 Musical Instruments a Year