Grapp Company had $130,000 in sales on account last year.The beginning accounts receivable balance was $18,000,and the ending accounts receivable balance was $16,000.The company's average collection period (age of receivables)was closest to which of the following?

Question

Quizplus · Accepted Answer

Step 1: Calculate the average accounts receivable balance for the year.
Beginning accounts receivable balance = $18,000
Ending accounts receivable balance = $16,000
Average accounts receivable balance = ($18,000 + $16,000)/2 = $17,000

Step 2: Calculate the accounts receivable turnover ratio.
Accounts receivable turnover ratio = Sales on account / Average accounts receivable balance
Accounts receivable turnover ratio = $130,000 / $17,000 = 7.65

Step 3: Calculate the average collection period (age of receivables) in days.
Average collection period = 365 days / Accounts receivable turnover ratio
Average collection period = 365 days / 7.65 = 47.73 days

Therefore, the closest answer choice is B) 47.73 days.

Grapp Company Had $130,000 in Sales on Account Last Year