Assume the following data: Sales = 3200; Cost of goods sold = 1600; Average receivables = 200.Calculate the average collection period.

Question

Quizplus · Accepted Answer

Average Collection Period = (Accounts Receivable / Credit Sales) * 365 
Credit Sales = Sales - Cost of Goods Sold = 3200 - 1600 = 1600 
Accounts Receivable Turnover = Credit Sales / Average Accounts Receivable = 1600 / 200 = 8 
Average Collection Period = 365 / Accounts Receivable Turnover = 365 / 8 = 45.625 or approximately 22.8 days. Therefore, the best choice is B.

Assume the Following Data: Sales = 3200; Cost of Goods